Have Cattle Formed A Seasonal Top?

Have cash cattle prices reached a seasonal top?  The answer is a strong maybe.

Fed cattle traded in the Plains last week, steady to $1 per cwt lower than the previous week, a move some analysts link to last week’s drop in futures.  It also was a move that some say established the previous week’s average price near $125 as a seasonal top in cash markets.

If the previous week’s price of $125 were the seasonal top, there is little evidence to say there even is a seasonal top.

The average price two weeks ago was $124.70 per cwt on a live basis.  Assuming last week’s average price will follow anecdotal evidence and tick downward, last week’s prices will tilt slightly downward from the previous week.

That would leave the previous week’s price of $124.70 per cwt the highest so far this season.

The 2011-2015 average price shows a seasonal peak of $137.30 in the fourth week of October.  But it isn’t much of a seasonal peak.  Weekly cash cattle prices trade within a $2 range until the first week of December.

After that, the average price of cattle drops about $5 per cwt before making a rebound in the last week of the year.

Last year, the seasonal high came in the last week of December after a minor peak the third week of November.

 

FUTURES HAVE A SAY

 

As of Friday’s close, live cattle futures prices have a carry, that is each succeeding delivery month had a higher closing price.  This is telling cattle feeders that prices likely will go higher through April.

That will prompt cattle feeders to keep cattle on feed a little longer, trying to capture a higher price the following week.

Eventually, average cattle slaughter weights will rise, producing more beef per animal slaughtered and fill the beef market, causing prices to decline.

However, in the meantime, slaughter rates could be choked, supporting fed cattle prices in the country.  If there is enough support, the most recent cash high of $124.70 per cwt may be vulnerable.

 

BEEF’S PART

 

Ultimately, the whole thing depends on beef demand, which is strong for choice beef this time of year.  And ever since the USDA reprogrammed its grading cameras at the packing plants, about three weeks ago, there has been less choice and more select beef produced.

Given the seasonal push for choice beef, it’s just possible that the current seasonal peak cattle price may not be the top.

 

CATTLE, BEEF RECAP

 

About 465 head of fed cattle sold on the Livestock Exchange video auction Wednesday at $124 per cwt, up $4 from a week earlier.

Light trade was reported Tuesday in the Plains at $124 per cwt on a live basis, steady to $1 lower than the bulk of last week’s action.  More trading was reported Wednesday at $123 to mostly $124 and at $191 to $194 on a dressed basis, down $1 to up $3 from the previous week.

The USDA’s choice cutout Friday was up $1.11 per cwt at $213.85, while select was off $3.79 at $194.51.  The choice/select spread widened to $19.34 from $14.44 with 72 loads of fabricated product sold into the spot market.

The CME Feeder Cattle index for the seven days ended Thursday was $159.38 per cwt, up $0.30.  This compares with Friday’s Nov settlement of $158.47, unchanged.