Cattle Market Feels Tired But Firm: Rabobank

After the bull run of 2014, the cattle market is feeling “tired,” according to Rabobank’s quarterly report on the beef market.

“Following the exceptional run-up in both cattle and beef prices for the year, traders are squaring positions before the holiday season, and the market is beginning to feel tired,” the report said.  “Based on seasonal considerations and the record price levels, the market is vulnerable to a moderate near-term price correction.”

The US beef and cattle markets moderated in the fourth quarter, although tight supplies of both remain a major market factor.  The dichotomy of the two leaves the market uncertain about where to go next.

The US remains the major global driver in the beef and cattle market, with import demand boosting prices and cutting supplies in other countries.  But if Australian exports decrease and herds in Mexico and Canada continue to be pruned by the US, prices could rise even more, despite the market’s tired feeling.

“The US continues to be the driver in the global beef market with constrained supply and strong demand keeping prices high,” Rabobank analyst Angus Gridley-Baird said.  “A recent strengthening in the US economy and dollar will support continued imports to the US.  However, we are watching a drop in the oil price and depreciation of the Russian Ruble given Russia’s status as the world’s largest beef importer,”




Although Rabobank economists see a short-term pause in the cattle and beef markets, US cattle prices during the fourth quarter have continued at record levels, driven by exceptionally tight supplies and strong demand.  First-quarter supplies will again be tight with renewed price strength expected.

Yet Ross Pruitt, Louisiana State University professor of agricultural economics, said lower estimated ration costs are helping the poultry industry.

And “given the higher prices consumers have paid for beef and pork so far in 2014 (and still to come), consumers may soon switch to cheaper alternatives and result in moderating beef and pork prices,” Pruitt said.

“With total chicken in cold storage at the lowest levels since 2007, there appears to be room for chicken production to increase without negatively impacting current price levels,” Pruitt said.

Poultry firms have kept production expansion in check with only a 1.6% 2014 increase, even though lower estimated ration costs and strong margins suggest it could have been higher.  Company executives have stated in recent months that they expect chicken profits to moderate in 2015 as the industry expands production by about 3% over 2014.




Cash cattle markets traded higher Wednesday with prices ranging from mostly $162 per cwt on a live basis up to $164, up $6 to $7 from last week.  On a dressed basis, cattle traded at $253 to $258, up $4 to $6 from last week.

Cash and futures markets are expected to be quiet today as many traders extended the Christmas holiday to give them a four-day weekend.  Besides, cash volume Wednesday was thought to be adequate to supply packing plants with their necessary inventory for next week’s holiday-shortened kill week.

This week’s cattle markets helped to get feedlots nearer to breakeven after falling to a loss of $40 a head last week.  Feedlots may also have been helped by a decline in cash feeder cattle prices.

Beef markets did their part Wednesday with the USDA’s choice cutout rising $1.34 per cwt from Tuesday to $243.94 and select going up $1.93 to $231.19.

The CME Feeder Cattle Index for the seven days ended Wednesday was $225.03 per cwt, up $0.27, while the Jan futures contract settled down $2.37 at $214.75.