If seasonal trends prevail, Southern Plains weekly average fed steer prices should begin seeing some pressure soon.
Average weekly slaughter steer prices for the Southern Plains from the USDA’s Agricultural Marketing Service as compiled and plotted by the Livestock Marketing Information Center, hit their annual peak the third week of March. The latest five-year average (2015-2019) is $136.80 per cwt.
A challenge to that high comes the first week of May. In the latest five-year average, this is at $136.19 per cwt.
A CLEAR TREND
Whatever and whenever the seasonal high hits, the trend is clear on a graph. Weekly average Southern Plains fed steer prices decline unevenly through September only to catch a wave and move higher through December.
Annual weekly averages can show significant variability, although the general trend is the same. Last year, for example, the annual fed steer price in the Southern Plains, at $124 per cwt, came in the first and second weeks of January.
From there, 2020 prices hit three successive swing lows before beginning a fall upswing early in July. It’s true that last year’s late spring and early summer fed cattle markets were upended by COVID-19 lockdowns and plant closures, but the overall trend from the annual high early in the year to the annual low in the summer to early fall remained in place.
TREND RELATES TO SUPPLY AND DEMAND
The reason for the seasonal pressure of Southern Plains fed steer prices has as much to do with supply as it does with beef demand, an analyst said.
Data from the USDA’s AMS and National Agricultural Statistics Service compiled and graphed by the LMIC show a distinct rise in steer slaughter through June followed by a slow but steady decline into mid-December where it drops off precipitously.
But that doesn’t mean beef demand has no role to play. (Actual demand is hard to measure since it involves an emotion on the part of the buyer, but consumption can be a proxy for demand.)
Data from the Bureau of Labor Statistics and the USDA’s ERS, compiled by the LMIC show a beef demand index (where 2000 equals 100) of 116 in the first quarter of 2000, 117 in the second, 105 in the third and 117 again in the fourth.
From that, it’s not hard to see how the dog days of summer fit together with an early summer slaughter peak to pressure prices into late summer.
Another market analyst said this all goes to show how important risk management is to producers. It’s difficult to manage the risks of a given year (who can forget 2020?), but it’s easier to manage risks associated with a multi-year trend.
CATTLE, BEEF RECAP
Fed cattle trading last week was at $114 to $115 per cwt on a live basis, up $1 from the previous week. Dressed-basis trading was steady to up $2 at $180 to $182.
The USDA choice cutout Tuesday was up $3.04 per cwt at $233.99, while select was up $2.18 at $225.23. The choice/select spread widened to $8.76 from $7.90 with 99 loads of fabricated product and 44 loads of trimmings and grinds sold into the spot market.
The USDA reported Tuesday that basis bids for corn from livestock feeding operations in the Southern Plains were unchanged at $1.25 to $1.27 a bushel over the May CBOT futures contract, which settled at $5.51 1/4 a bushel, up $0.02 1/4.
The CME Feeder Cattle Index for the seven days ended Monday was $134.64 per cwt, up $0.38. This compares with Tuesday’s Mar contract settlement of $135.45 per cwt, up $0.37.