Cash Cattle Lower; Working On Seasonal Top

Cash cattle prices this week are lower as the market works in a seasonal top, even though longer-term projections indicate fall prices could work to new record highs.

Live cattle in the Plains Thursday traded at $161 per cwt in Texas, down $2 from last week, and there were rumors of even lower trades later in the day elsewhere in the Plains.  In Kansas, bids were reported ranging from $159 to $160 with asking prices at $164.

A graph of weekly southern Plains fed cattle prices shows a peak two weeks ago at $163.77 followed by last week’s average at $162.97.  But these prices are so far above last year and the five-year average that a setback was almost inevitable.

USDA data show that the peak price two weeks ago was $44.74, or 37.59% above last year’s $119.03 and $65.73, or 67.04%, above the five-year average of $98.04.

The cash market tried to set back after the Independence Day holiday but was only temporarily successful.  At that time, prices peaked at $157.85 and were followed by two weeks of declines to $155.62.  The following week, however, prices jumped $8.00 to $163.77.

Old-time traders would say the market has a serious gap to fill before moving higher again.

 

MEAT PRICES BOOST CASH

 

Supporting the move toward the cash peak has been a strong beef market, and it’s why some think the current decline will be temporary, like the one in July.

Unlike last year, the USDA’s choice boxed-beef cutout value rose over the last two months, hitting record highs in all but one week since the last week of June.  This pushed margins for large packing plants out to very profitable levels and encourages attempts to maximize plant slaughter and processing capacity.

The weekly boxed beef price last week was reported by the USDA at $262.06 per cwt, up $8.29, or 3.27% from $253.77 the previous week.  It also was up $75.38, or 40.38%, higher than last year and $101.57, or 63.29%, higher than the five-year average of $160.49.

The record-high beef prices speak volumes about consumer demand, which is the foundation for the current market.  Analysts and traders wonder each week if consumers will back away from the market.

In the meantime, the market remains skittish.  Packers would like to maximize plant efficiency, but feedlots either don’t have the cattle necessary to boost slaughter rates or they are holding them a little longer to pack on a few more pounds.

 

PACKERS WALK A TIGHTROPE

 

Packers are caught in the middle.  While they would like to increase slaughter and beef production, each time they increase weekly slaughter rates, it seems wholesale beef prices decline.

This week is a case in point.  Weekly slaughter through Thursday was estimated at 454,000 head, up only 3,000, or 0.67%, from last week, yet beef prices over the last five trading days are down.

The USDA’s choice boxed-beef value was reported Thursday afternoon at $262.41 per cwt, up $0.44 on the day, but down $1.25 for the week.  The select cutout was reported Thursday at $255.26, down $0.51 from Wednesday, and down $5.34 for the week.

The choice/select spread is widening seasonally and hints at higher prices for choice beef as meat buyers prepare for the Labor Day holiday and then for the year-end holidays.  And a rising choice market will tend to drag select along.

But pork prices are much less expensive by comparison and may provide a drag on beef price advances.

The CME Feeder Cattle Index for the seven days ending Wednesday was $223.94 per cwt down $0.62.