Cattle Outlook Debated

Analysts debate the outlook for fed cattle prices for the rest of the year, with leaning slightly bullish and others expecting a continued bearish slide.

Some market analysts said they expect to see steady to slightly stronger prices for the rest of the year and that the market’s low may have been set two weeks ago.  The USDA reported its five-market average price for fed steers last week at $104.15 per cwt and for slaughter-ready heifers at $104.36.  These were up from the previous week’s 2016 low of $99.24 and $99.81, respectively.

 

SIGNS OF LIFE?

 

“The first signs of life in the cattle market surfaced this week as the November feeder cattle futures price increased over $9 from the contract low late last week,” said Extension Agricultural Economist Andrew Griffith in his weekly market analysis and comment.

“The stronger feeder cattle futures resulted in steer prices in Tennessee (and elsewhere) being up $3 to $6 per cwt compared to last week while heifer prices were up $5 to $10 per cwt,” he added.  “It is not common for calf and feeder cattle prices to escalate during October and November, but there is potential for prices to increase this year because the lighter weight animals have been undervalued for several weeks.”

Griffith expected deferred feeder cattle futures contracts to escalate relative to the nearby Nov contract and converge with cash levels as the marketing time period is reached.

He cautioned, however, that producers should not expect any tremendous price recovery over the next month, even though he expected cattle prices to inch higher through the end of the year.

 

OTHERS MORE BEARISH

 

Other, private, market analysts aren’t as bullish.

The more bearish market seers say the calf crop was larger than is being indicated by the number of placements, and one, or both, of two things is happening:  Either the calves are being placed into feedlots of less than 1,000 head and thus are being missed by the USDA when it counts only feedlots of 1,000 head or more capacity, or they are still on grass that hasn’t been killed by the season’s first frost.

Either scenario is bearish for fed cattle prices over the next several months.  And either way, futures traders are afraid to hold very long live cattle positions, something that will keep a lid on cash markets.

One said that while many traders search for a crystal ball or market system for determining cash prices in the future, the futures market remains their best tool.  It certainly isn’t perfect, but it represents the sum total of what traders and investors are thinking about prices in coming months.

The futures market anticipates only a slight upturn by February, followed by more weakness into August.

 

CASH CATTLE MARKETS QUIET

 

Cash cattle markets Monday were quiet after trading late last week at $105 per cwt on a live basis and $164 dressed.  This followed light action earlier in the week at $102 to $104 live and trade the previous week at $98 to $102 live and $154 dressed.

The USDA’s choice cutout Monday was $1.65 per cwt higher at $184.76, while select was up $2.85 at $173.01.  The choice/select spread narrowed to $11.75 from $12.95 with 83 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Friday was $124.67 per cwt, up $2.83.  This compares with Monday’s Nov settlement at $121.85, up $0.30.