No trading has been reported in the Central and Southern Plains this week, but bids from packer buyers already are even with last week’s average of $161 per cwt on a live basis, hinting that even higher prices are possible.
On a dressed basis, bids were reported Wednesday at about $261.
Some traders report that packers are short on cattle inventory for next week’s slaughter plans. And while it’s always risky for cattle owners to pin merchandising plans on rumors that packers are short bought, rising bids in the first half of the work week might give a bit of credence to the reports.
Cash cattle prices last week rose unexpectedly, reversing the trend seen since the beginning of the year. Yet if last week’s bounce caught traders off guard, they might not have been so flummoxed if they had looked at a graph of last year and the previous five-year average.
A graph from the Livestock Marketing Information Center shows the average price has a tendency to turn up in the fifth week of the year. This trend continues unevenly until early April when it turns down into late July or early August.
Last year’s cattle prices appeared to be an anomaly, rising unevenly throughout the year and only showing a spring/summer slowdown through May before resuming their upward trek. Tight supplies of slaughter-ready cattle were blamed as cow/calf producers kept heifers on site for breeding rather than sell them into the feedlot/slaughter market.
FUTURES TRADERS NON-BELIEVERS
But if fed cattle prices are supposed to rise for the next 1 ½ months, and continued heifer retentions are likely, the futures market doesn’t seem to be on board with a bullish pricing scenario.
Coming delivery months through Aug settled Wednesday incrementally lower. Even the nearby Feb contract settled at $158.60 per cwt, down $0.50 and $2.40 below this week’s high bid of $161.
USDA reports of a larger-than-expected calf crop last year, a rising US Dollar, which will make beef exports harder to accomplish and imports easier, also give futures traders pause.
Adding to the short term worries for live cattle futures was news that Asian food companies were cancelling US meat purchases because of delays at West Coast ports caused by ongoing contract disputes. Another newswire story saying curtailed port operations are planned for this weekend may add weight to the futures market even if cash prices trade steady to higher.
FUTURES IGNORES HIGHER BEEF
Cattle futures markets Wednesday seemed to ignore a higher USDA quote for boxed beef. The choice beef cutout Wednesday was listed at $239.74 per cwt, up $1.32 from Tuesday. The select cutout was $236.36, up $2.80.
Volume was moderate with 108 loads of fabricated product sold into the spot market.
Beef quotes often direct futures price moves, but the lack of trader faith in the beef market was evident in the lower futures market settlement prices.
Feeder cattle also were lower, even though cash markets remain firm. The Mar contract settled Wednesday at $198.75, down $3.27 while the CME Feeder Cattle Index for the seven days ended Tuesday was $209.84, up $0.94.