Bearish sentiment is taking over the fed cattle cash market, and they could follow the direction of the 2012-2016 average and sag unevenly into a late summer low.
Last year, unexpectedly strong beef demand pushed cash cattle prices uncharacteristically higher. However, expected larger supplies of fed cattle this year are pressuring the market while chilly weather is holding up the grilling season’s start.
Fed cattle are trading $4.50 to $5 per cwt lower on a live basis this week after dropping $2 last week as bearish sentiment works its way into the markets.
In fact, the Southern Plains average cash price last week of $125.57 per cwt was the second straight week where prices were below the same week a year ago.
AVERAGE TREND IS LOWER
The average fed cattle price has an uneven track into September with a false bounce in July and August. The fall rally takes place in September and October but tends to top out in August.
Last year, cash cattle prices peaked at $144.73 per cwt the first week of May, followed by a secondary bounce to $136.92 the first week of June. After that, a combination of increased fed cattle supplies, hot summer weather and somewhat uncertain economic conditions took a swipe at beef demand, and cattle prices followed.
The fall rally, then was more pronounced and began earlier than usual. Some of that fall optimism spilled over into the new year, but it seems to be fading now.
Just looking at a graph of fed cattle prices could lead traders to feel cash cattle prices this year are likely to follow the average more than last year’s trend.
BEEF PRICES STILL STRONG
However, choice wholesale beef prices are trending higher than last year.
Last week’s average wholesale price for choice 600- to 900-pound carcasses was $224.46 per cwt, compared with $223.12 in the same week last year and the 2012-2016 average of $220.23.
It appears that wholesale beef prices are following the general trend of the five-year average with some exaggeration like last year.
What remains to be seen is whether beef values will make the April-through-June rally of last year. An analyst said such a move would be hard for the market to retrace this year, given the increased supply of cattle that are in US feedlots currently.
The problem is predicting when those cattle will come out for slaughter. Many went in at light weights and will take longer to reach slaughter weight and finish. They also will come out at lighter weights than their counterparts that went on feed at heavier weights.
CATTLE, BEEF RECAP
No cattle sold Wednesday on the Livestock Exchange Video Auction, after 166 head sold a week earlier at $125.63 per cwt, down $98.63 from a week earlier.
Cash sales this week range from $119 to $121.50 per cwt on a live basis, down $4.50 to $5 from last week. Dressed-basis trading last week was $200 to $203, down $4 to $5.
The USDA’s choice cutout Wednesday was down $0.78 per cwt at $221.62, while select was off $2.61 at $211.63. The choice/select spread widened to $9.99 from $8.12 with 120 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Tuesday, was $136.23 per cwt, up $0.01. This compares with Wednesday’s Mar settlement of $135.97, up $0.55 and Apr’s close of $137.82, up $2.47.