Some analysts may say the live cattle futures market is overbought and due for a correction, but the cash market has some seasonal strength to work out.
It’s true that weekly average cash prices for slaughter-ready steers in the Southern Plains are well below last year and the 2013-2017 average, but they are rising and closing fast. Plus, the seasonal tendency for rising fed cattle prices at this time of year is strong.
HISTORICAL PERSPECTIVE
Data from the USDA’s Agricultural Marketing Service and compiled by the Livestock Marketing Information Center show that the annual low point for fed cattle in that region came earlier than usual but later than last year at $99.48 per cwt on a live basis during the second week of September.
Since then, weekly average prices have risen an average of 2.23% each week.
Last year, the annual weekly average low price came the last week of August at $106.92 per cwt and rose an average of 0.63% in the weeks through the second week of October.
The 2013-2017 average price graph has the annual bottom occurring the last week of September at $123.11 per cwt with an average weekly gain through the second week of October at $1.74.
WHAT TO EXPECT
At those rates of gain, this year’s sale price for fed steers may merge with last year’s this week. Last year’s weekly average price for Southern Plains fed steers was $111.00 per cwt, which would be a gain of $2 to $3 from last week.
Until the fire that closed Tyson’s Finney County beef plant near Holcomb, KS, on Aug. 8, weekly average 2019 fed cattle prices in the Southern Plains tracked closely with year-earlier values. In the wake of the fire, uncertainty abounded among cattle sellers, buyers and speculators and prices dropped out of synch with last year.
In the weeks that followed, it became apparent that packers geared up, resulting in no backlog of finished cattle in the feedlots.
Now the market is playing catch-up, and how it retrieves that synchronicity with last year is anybody’s guess, a market analyst said. It may be that weekly average prices will overshoot last year’s for a while before getting back in the groove.
Or not.
Agricultural markets have a habit of confounding expectations, so predicting a rise above the 2018 price line is chancy, the analyst said.
But going with the seasonals, it’d be a good bet that cash cattle prices will rise into mid-November, dip for the Thanksgiving Day holiday and then rise again as the Christmas and New Year’s holiday’s approach.
BEEF PRICES REMAIN FIRM
But beef prices remain firm following the post-fire spike. The weekly average choice boxed beef cutout value from the USDA showed a reversal of fortunes last week, halting a steep slide from the spike and turning prices upward in a seasonal push.
Further strength can be expected for the next week or two.
CATTLE, BEEF RECAP
Cash cattle changed hands last week at $108 to $109 per cwt, up $1 to $2 from the previous week, while dressed-basis trading was at $172, up $2.
The USDA choice cutout Tuesday was up $0.80 per cwt at $218.02, while select was up $2.15 at $191.48. The choice/select spread narrowed to $26.54 from $27.89 with 95 loads of fabricated product sold into the spot market.
No cattle were posted Tuesday for delivery against the Oct contract.
The CME Feeder Cattle index for the seven days ended Monday was $145.09 per cwt, up $0.83 from the previous day. This compares with Tuesday’s Oct contract settlement of $145.00, down $0.55.