Absent other important fundamental or technical factors, critical decision points in futures market tend to hinge on round numbers. At the very least, such numbers often generate a lot of attention.
The Mar live cattle contract broke through the $200.00-per-cwt barrier on Jan. 23, generating more attention as prices surged to a contract high of $207.72 on Jan. 28 before beginning a selloff the next day.
FUNDAMENTALS WEIGH IN
But cash cattle markets were not in lockstep with futures trading several dollars higher. The weekly average USDA price for fed steers in the Southern Plains topped out at $207.77 per cwt the first week of February, according to data compiled by the Livestock Marketing Information Center in Denver from the USDA.
The futures market continued to drag on cash prices through February, with last week’s recorded weekly Southern Plains average price of $198.96 live with dressed trade around $315 to $316 against an Apr settlement Friday of $196.27.
That’s pretty close together, but there’s more.
DISCOUNT MARKET
After popping through the $200-per-cwt barrier and setting new contract highs, some speculators turned bearish and took long profits on their futures market investments.
Despite continued consumer demand for beef, many investors continue to fear a pullback, and at a contract high, every long position represents a gain, a good time for further investment by deep-pocket traders or a good time to take profits.
Also, there is the matter of a strong US dollar hampering beef export demand.
Plus, with the Mexican border reopened to feeder cattle from there, and no strong indication that US cow/calf producers are rebuilding their herds, the futures market is trading at a discount through the Aug contract.
BACK TO FUTURES
“The finished cattle market broke $200 going one way, and now the finished cattle market broke $300 going the other way,” said University of Tennessee Agricultural Economist Andrew Griffin, in an emailed commentary. “The $200 price point was certainly resistance as the market pushed higher…, but its unlikely anyone expected it to be a support price at this point in the game.”
So where might support be found? Cash markets are nearly on par with the Feb contract, but Apr is lower, and so is Jun and Aug.
“It is difficult to fathom cash prices in January and February being higher in April and May with no more $200 cattle even priced on live cattle futures,” Griffith said.
So the jury is out on were support might be found. It may come down to when and how strong the start to the 2025 grilling season is.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $199.80 per cwt to $207.87, compared with last week’s range of $202.97 to $210.18 per cwt. FOB dressed steers, and heifers went for $315.50 per cwt to $319.42, compared with $318.80 to $327.62.
The USDA choice cutout Thursday was down $1.72 per cwt at $311.18 while select was off $1.11 at $302.13. The choice/select spread narrowed to $9.05 from $9.66 with 132 loads of fabricated product and 31 loads of trimmings and grinds sold into the spot market.
The USDA-listed the weighted average wholesale price for fresh 90% lean beef was $377.03 per cwt, and 50% beef was $104.10.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.27 to $1.38 a bushel over the Mar corn contract, which settled at $4.64 3/4, down $0.13 1/2.
The CME Feeder Cattle Index for the seven days ended Wednesday was $279.64 per cwt, up $0.91. This compares with Thursday’s Mar contract settlement of $276.35, up $2.07.