There’s an old saying among seasoned traders to never fade the seasonals, but the cash fed market continues to defy the odds.
The ability of the beef market to hold out against the seasonal tides is remarkable given the growing abundance of pork and chicken, and it’s making many traders nervous.
The cash fed cattle market so far has held out against a seasonal price downturn, and while many still expect rising supplies of pork and chicken to effect the move, it still hasn’t happened.
Typically, the fed cattle market begins to soften in early April and doesn’t turn up again until late July or early August. Last year, the slide began pretty much on time, in late March, but abruptly turned higher in early June.
This year, a price peak occurred in the first week of April, leading many to believe the annual slide had begun right on time. However, after a three-week decline, the market bounced and has held steady into May, as this Livestock Marketing Information Center of Southern Plains slaughter steer prices shows.
Last year’s early bounce out of the summer doldrums can be attributed partly to the tight supplies of fed cattle and surprisingly stable demand for beef. This year, beef supplies remain tight, but prices are out of synch with pork, and many expect beef to fall and take fed cattle prices along.
The only fly in the ointment could be unexpected and inexplicably strong domestic or export beef demand, or both.
Another couple of weeks will take the slaughter steer market into last year’s early summer bounce and further confuse traders.
HOG PRICES UNUSUALLY STRONG
Part of the issue for the cattle markets may be that pork and slaughter hog prices have shown unexpected strength since early April.
The weekly National Weighted average carcass price rebounded in early April, similar to the 2009-13 average, but has risen faster than normal to approximate the seasonal line in the last three weeks in spite of rising supplies.
That mirrors the turn higher in the weekly pork cutout value, which came despite April 1 cold storage supplies being up 16% from last year.
Market analysts think early year expectations for lower hog and pork prices kept many traders sidelined until April when prices became too attractive to ignore. Since then, more buying and retail featuring have resulted in the latest bounce.
CASH CATTLE MARKETS QUIET
No cash cattle trading has occurred yet this week, but asking prices were near $163 per cwt on a live basis and $258 to $260 on a dressed basis, compared with last week’s $159 to $160 live and $252 to $253 dressed.
Beef prices Wednesday continued to drop, with the USDA choice cutout at $249.28 per cwt, down $2.31, and the select cutout at $239.80, off $1.55. Volume was very heavy with 167 loads of fabricated product sold into the spot market.
Slaughter this week is running behind year-ago rates, and Wednesday’s kill at 111,000 head was well below the 117,000 of last week and the same day a year ago. Packers are trying to hold on to their positive margins and may be cutting back on kill rates to avoid over-production of beef.
The CME Feeder Cattle Index for the seven days ended Tuesday was $223.61 per cwt, up $0.55.