Cash Cattle Prices Turning South

Cash cattle prices are turning south, and with futures seemingly in a freefall, fed cattle prices in the Plains are almost certainly doomed to drop further.

Such a move would exacerbate feedlot losses and could bring a general flushing of overly fat cattle to slaughter.  This may be part of the reason for a sharp, 14,419-head increase in the number of cattle being offered for sale this week in Texas, as reported by Cattle-Fax, a Denver-based market advisory group.

Unhedged feedlot losses were estimated by Sterling Marketing Inc.’s weekly Profit Tracker at $486.16 a head after last week’s lower cash prices, down from a loss of $320.63 the previous week.  Sterling, based in Vale, Ore., is another market advisory company.

A graph of weekly Southern Plains prices for fed cattle by the Denver-based Livestock Marketing Information Center, shows last week’s downturn in comparison to last year and the previous five-year average.  It also shows that for the last two weeks of October, cash cattle prices were losing upward momentum.

 

BASIS PROJECTS LOWER CASH

 

Dec futures Monday closed down the daily limit of $3.00 per cwt at $131.92.  A “turnaround Tuesday” could erase some of this, but basis records point to lower cash prices this week.

A table of weekly basis calculations by the LMIC show that the 2009-2013 average basis for this week is a minus $.29 per cwt.  If futures hold around Monday’s limit loss, this would project an average cash price for the week near $131.60, down from last week’s cash price of $132 to mostly $134.

However, the basis this fall has been running below the five-year average, indicating a cash market bias to undershoot the seasonal.  Last week, the five-year average basis was a plus $0.03 per cwt with a standard deviation of $1.50.  But the actual basis last week was a minus $4.20.

So Monday’s limit loss could be seen as an effort to get futures back into line with the cash market.  If this is so, and the cash market continues to undershoot the futures by a similar amount, cash cattle in the Plains this week could be around $128 to $130 per cwt.

And cash cattle could continue lower as beef loses holiday traction.  Cheap hams are said to be competing with the venerable turkey for a place at the Thanksgiving Day feast, and if hams are making inroads against the much cheaper turkey, how much more must they be infiltrating beef’s customer base?

 

CASH FED CATTLE MARKETS QUIET MONDAY

 

Plains direct fed cattle markets are quiet with feedlot showlists averaging higher after a surge in offerings by Texas/Oklahoma lots.  No bids or offers were reported as future locked limit down Monday.

The markets traded in a wide range last week from mostly $133 to $135 per cwt, while on a dressed basis, prices were mostly $204 to $206.

In the Corn Belt, cattle traded at $130 to mostly $131 live and $205 to $208 dressed.

Wholesale beef prices Monday were mixed after being higher at midday, with the USDA choice cutout value at $216.45 per cwt, up $0.79 on the day, and its select cutout at $206.69, off $0.56.

The choice/select spread widened to $9.76 from $8.41 on Friday, and there were 81 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Friday was $188.47 per cwt, down $1.05.  This compares with the Nov settlement Monday of $177.12, down $4.50.