Cash slaughter steer prices appear to be following the trend of last summer, and if the trend continues, they won’t bottom until the first week of September.
The timing of the summer bottom would be earlier than the 2012-2016 average, which comes the last week of September.
Since crossing below the 2017 price the second week of March, the fed cattle price in the Southern Plains has followed a similar pattern of highs and lows. The swing high since crossing came the first week of May at $125.68 per cwt on a live basis.
That wasn’t this year’s weekly high fed cattle price, though. That was $129.95 per cwt in the third week of February.
Since then, fed cattle prices have shown a definite downtrend as the number of fed cattle being presented to packer buyers and getting ready for slaughter rose in response to the growing US cattle herd.
THE SUPPLY CONNECTION
Long-time cattle traders will say that cattle and beef prices rise and fall in response to supply. They say that consumer demand doesn’t change much unless a source of demand can be added or subtracted, like export demand.
Price has a lot to do with consumption and less to do with demand unless it is considered on a long-term basis in that it adds or subtracts consumers. Extremely poor populations will increase their meat consumption if their economic position in society changes – in other words, if their income base changes, they can be added to the list of new consumers, and demand increases.
In the case of US beef, domestic consumers already have plenty of protein in their diets, so the competition aim is to steal customers away from competing meats for a time or to increase consumption with affordable prices or better product.
Once US consumers are willing to pay more for the same amount of product, demand can be said to have increased. But this is very hard to measure and is done over time.
Thus, supply is the big variable in the US, and red meat and poultry supplies are growing.
To concentrate on beef, commercial production is up. In fact, the weekly average by month of commercial beef production was above the previous five-year average in every month except one last year and so far this year.
At the end of last week, total beef production was placed at 12.505 billion pounds, up 3.6% from 12.072 billion in the same period last year.
That increase in beef production came with an increase in cattle slaughter. As of the end of last week, the estimated cattle slaughter for the year totaled 15.4 million head, up 3.1% from 15.0 million in the 2017 period.
CATTLE, BEEF RECAP
Three hundred six head of fed cattle sold Wednesday on the Livestock Exchange Video Auction at $106 per cwt, down $4 from the previous Wednesday’s $110.
Cash trade was reported Wednesday at $106 per cwt on a live basis, down $2 to $4 from last week, and at $168 to $170 on a dressed basis, down $3 to $4.
The USDA choice cutout Wednesday was down $1.53 per cwt at $215.30, while select was off $0.69 at $200.88. The choice/select spread narrowed to $14.42 from $15.26 with 93 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Tuesday, was $141.78 per cwt, down $0.03. This compares with Wednesday’s Aug settlement of $145.77, down $0.32.