As more market analysts publish their takes on the Jan. 1 USDA Cattle (Inventory) report, it becomes clear that the bull market for cattle is likely to continue.
It all still depends on the beef consumer. If high retail prices don’t drive them away, the market can at least continue to be supported at its current high level, if not work its way higher.
The report only hinted at cattle herd rebuilding thoughts by cow/calf producers. It fell short of confirming any sort of action was happening, and the total herd declined in numbers from a year earlier.
LOWEST HERD IN 75 YEARS
The report showed the US herd at 86.155 million head, down from 86.472 million a year earlier and the smallest in 75 years. Heifers being targeted for the breeding herd were up 4.17 million head, or 0.89%, from 4.673 million last year to 4.714 million this year.
But such a small increase was explained by some as just herd maintenance and not herd rebuilding. At most, it represents a desire among cow/calf producers to expand, a market analyst said. If it shows a tentative step toward herd rebuilding, the mood can change quickly if the weather does not cooperate and the drought continues.
The important thing was that the trend of reducing the number of cows in the herd is ongoing, the market analyst said.
FIRM FOUNDATION IN FUTURES MARKET
Despite some significant setbacks, the live cattle and feeder cattle futures markets remain on solid ground, market analysts suggested. Some technical factors currently point to some long profit taking from time to time, but the fundamentals of a very short cattle supply keep underpinning the pullbacks.
It’s not surprising to see some violent price drops and a more orderly climb back to market highs. Market investors who are in it for the speculative gains get cold feet quickly at any whiff of bearish news, even if it’s just that the other guy is selling.
Technical traders tend to rule at times.
The market also has gotten used to moves by President Trump to increase beef imports from Argentina to augment retail meat supplies. Traders realize that the amount of beef available to export to the US is minimal since it would have to be drawn away from other of Argentina’s export customers, and that most, if not all, of it would be lean beef and lean trimmings suitable mostly for grinding into hamburger.
It would not cover all the cuts customers are used to seeing in the grocery stores and, thus, likely would not affect cattle and wholesale beef markets to any appreciable degree.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $243.85 per cwt to $245.15, compared with last week’s range of $236.32 to $242.85 per cwt. FOB dressed steers and heifers went for $379.29 per cwt to $380.22, compared with $369.10 to $380.59.
The USDA choice cutout Monday was down $1.57 per cwt at $367.76 while select was up $0.82 at $365.35. The choice/select spread narrowed to $2.41 from $4.80 with 52 loads of fabricated product and 16 loads of trimmings and grinds sold into the spot market.
The USDA-listed the weighted average wholesale price for fresh 90% lean beef as $415.28 per cwt, and 50% beef was $139.15.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $0.98 to $1.12 a bushel over the Mar corn contract, which settled at $4.28 3/4, down $0.01 1/2.
No live cattle delivery intentions were posted Monday.
The CME Feeder Cattle Index for the seven days ended Friday was $374.66 per cwt, up $0.19. This compares with Monday’s Mar contract settlement of $367.45, up $0.02.