Cattle Prices Set Record; Further Gains Will Be Harder

Slaughter steer prices rose last week, resetting the upper end of the sideways channel on price graphs, yet further gains depend as much on beef demand and packer margins as they do on tight supplies.

Last week’s mostly $164-per-cwt price tag on slaughter-ready cattle was the third straight week of increases, pinching packer margins in spite of higher wholesale beef prices.  The rub is that boxed-beef cutout values tend to show less spark as consumer attention is fragmented through fall.

The USDA’s five-market weighted average weekly slaughter steer price was reported at $163.82 per cwt, up $3.28, or 2.04%, from the previous week when it was $160.54.  Last week’s price also was the highest of the year, eclipsing the previous high of $163.26 set the last week of July.

Sources say the market appears to be on an uptrend, and live cattle futures seem to say Chicago traders feel prices are going higher.

However, live cattle open interest declined 4,290 contracts Tuesday while prices rose, suggesting a market bias toward short covering rather than new long positions.  Such markets tend to have weaker legs because once the short covering is complete, there are fewer of these traders to gird up the market if it should move lower.

And beef cutout prices are mixed with the USDA reporting its choice boxed-beef price Tuesday at $249.41 per cwt, a gain of $1.10 from Monday, but its select cutout value at $236.08, a decline of $0.33.  The choice/select spread widened to $13.13 from $11.90 on Monday, and there were 109 loads of fabricated product sold into the spot market.

If the weekly choice/select spread follows the seasonal average, it will continue widening into the last week of November.




But beef demand and packer margins are questionable, making predictions of further gains in live cattle prices an uneasy affair.  September packer margins were calculated by many to be significant, and were cited for the light trading interest seen in late September and early October.

Packer margins may remain very weak for the next several months, maybe even years, sources say.  Another packing plant may close as a result.

Retail meat buyers likely will push back on further gains in product prices as they promote pork or poultry going into the holidays.  Consumers would not think twice about an extra week of turkey or ham grocery features leading up to the holidays, but such a move would hurt beef movement since most retail buying is done on feature.

Pork availability increases seasonally in the fall as well, making it easier for meat buyers to play beef against it with the packer.

Some sources questioned whether packers were gearing up for reduced slaughter schedules to support higher beef prices and trim fed cattle prices.

However, resilient cash cattle prices belie predictions of a market slump as heavy first-quarter placements come to market at heavier weights.  A surge of such cattle is either done or their numbers are waning.  Cash cattle prices are firm, and owners are unbending in their price demands.

Light cash trading was reported Tuesday in Nebraska at a steady $164, per cwt.  Sources said the buyer was rumored to be a major packer.  This hints that packer buyers may be ready to pay up this week for cattle to fill holiday and export orders.

Further bids and offers were lightly reported.  Asking prices generally were holding around $166 to $167 live and $255 to $260 dressed.