Ideas that cattle markets have put in an annual bottom may be premature as rising red meat and poultry production keep upping the ante for market share, but maybe not.
Fundamental market forces are adding some support to cattle prices, and there is historical precedent for prices to hit a bottom at this time of year. However, seasonal increases in slaughter numbers into early fall, and a historical tendency for the annual bottom to wait until then could be barriers to calling an early summer bottom.
Elliott Dennis, assistant professor and Extension economist at the University of Nebraska, said in this week’s Livestock Marketing Information Center letter to Extension agents, In the Cattle Markets, that feeder and slaughter cattle markets may have put in an annual bottom.
He based his assessment on the recent turn in futures markets. Aug live cattle futures made a low on June 24 of $101.97 per cwt.
Since then, the contract has worked its way upward to close Wednesday at $107.62, a gain of $5.65, or 5.54%. Aug feeder cattle put in a nearby low of $130.95 per cwt on June 24 and settled Wednesday at $141.92, a gain of $10.97, or 8.38%.
“This strong, upward movement appears to be supported by both fundamental and technical information,” he said. “Bottoming prices appear to have been driven by projected grain supplies, weather-driven pasture conditions and wholesale meat demand.”
UNCERTAIN CORN ACREAGE LIFTS FUTURES
Uncertainties about the number of acres planted to corn this year abound. On top of this, are uncertainties about how many planted acres were flooded, and the USDA’s acreage report June 28 only added to the puzzle when it reported many more acres of corn than was expected.
After the report, the USDA said it would resurvey farmers ahead of the Aug. 12 Crop Production report, but in the meantime, the market is in a state of flux because of a lack of information. A larger number of prevent-plant acres could emerge.
Also, heat and humidity across the Midwest has risen in recent weeks, aiding the crop that was planted and emerged. Corn likes hot and humid conditions since the humidity is a sign of good soil moisture, and corn matures on a combination of heat and number of growing days. Corn also needs humid conditions to pollinate well.
This year’s rains also have pastures growing well, increasing the desire to keep calves on grass longer for cheap growth. And, the USDA’s announcement waiving the Nov. 1 grazing requirement on prevent plant acres may extend the summer grazing window, Dennis said.
SEASONAL BOTTOM COMES LATER
All of that just may be enough to set the annual fed and feeder cattle price bottoms two weeks ago. It’s too soon to call, but the 2013-2017 average weekly Southern Plains price bottom comes the last week of September at $123.11 per cwt.
Producers likely have their brokers on speed-dial.
CATTLE, BEEF RECAP
Cash cattle trading was reported in the Plains last week at $109 to $113.50 per cwt on a live basis, steady to up $2 from the previous week’s action. On a dressed basis, trading was reported at $180 to $181 per cwt, steady to up $1.
The USDA choice cutout Wednesday was down $0.31 per cwt at $214.42, while select was off $1.20 at $190.89. The choice/select spread widened to $23.53 from $22.64 with 137 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Tuesday was $135.76 per cwt, up $0.32 from the previous day. This compares with Wednesday’s Aug contract settlement of $142.35, down $0.52.