Scattered cash cattle sales Thursday in the Plains at $164 per cwt on a live basis and at $256 on a dressed basis mean the market is following a seasonal trend, only in a much bigger way.
The live-basis prices are $2 to $4 below last week’s range of $166 to $168, and the dressed-basis trade is $8 to $9 down from last week’s range of $264 to $265.
On a live basis equivalent, Thursday’s dressed price is about $161, so sales today may be higher than this initial trade.
If the normal trend holds, Southern Plains slaughter steer prices should make another run higher late in the month. The futures market may even be anticipating this.
Over the last three trading sessions, the Dec14 contract’s settlement price has been relatively stable while the day’s low turned higher two days ago. Thursday’s session ended with a higher high and a higher low, even though the settlement was off by $0.07 per cwt.
And the pattern is similar for the most-active Feb contract, which also settled lower over the last three sessions but had higher lows with a higher high added on Thursday.
Some of the support is said to be technical in nature as the Feb contract tests the cycle low of $161.00 set on Oct. 15. Tuesday’s low was $161.22.
If this week’s cash trade turns out to be mostly $164, it could lend support to nearby futures contracts unless, as some suggest, traders are looking at record heavy carcass weights, larger feedlot inventories and larger beef imports.
CASH CATTLE ENTERING HOLIDAY VACUUM
Cash cattle and futures markets are entering a holiday vacuum of sorts. As more people take vacation time or are involved in other Christmas and New Year celebration activities, trading interest declines.
Packers are buying for two holiday-shortened kill weeks in a row, and if feedlot showlists are too large for packer needs, prices will decline. But since the data says prices usually rise in late December, this may not be the case again this year.
Whatever the scenario, the cash cattle market likely will be unsettled over the next two to three trading weeks and may suffer a hangover in January with lethargic trading the first week or two.
WHOLESALE BEEF A PUZZLE
Wholesale beef prices are a puzzle. Many expect a decline in holiday cuts to undermine the whole complex and take prices lower.
The choice cutout declined last week, and is down again this week, following last year’s pattern. The USDA Thursday reported choice carcasses were $2.16 per cwt lower on the day at $247.79. This was $6.63, or 2.61%, below the $254.42 of a week earlier.
Select carcasses Thursday were down $0.43 from Wednesday at $235.94 and were off $4.32, or 1.80%, from $240.26 a week earlier.
Thursday, the USDA reported 118 loads of fabricated cuts were sold into the spot market, and the choice/select spread narrowed to $11.85.
But those who expect a sharp decline in beef prices once the bloom goes off the holiday cuts are hoping the market goes against the grain. The demand just shifts to other cuts, supporting the meat market and preventing a significant drop.
The annual low comes in mid- to late February as consumers work to pay off holiday credit card bills.
But the 2015 low may be supported by crude oil, which is bouncing around $60 a barrel, prices that haven’t been seen in years. Gasoline is near $2.00 a gallon in many areas. Consumers have shown in the past that they will spend more on beef if they have a little extra.