Fed cattle prices are going to have trouble engineering a sustained price rally with wholesale beef prices headed lower.
This is an ongoing story with the main character, beef prices, keep following the trend of last year rather than the 1010-2014 average.
Choice beef prices have worked unevenly lower all year, refusing to kowtow to the influence of the five-year average, which trends slightly higher early, levels out until August and then begins a slow ascent into December.
Prices this year began on an up note as a surge in prices in December last year carried over into January. This was much above the five-year average, but at a lower level than last year.
This year’s price line crossed the five-year average in the last week of August when the reported price this year was $195.67 per cwt and the average was $196.21. It only looked back once, in late September when prices made a little rally that got them to within $4.22 of the average.
SLAUGHTER STEER PRICES FADE AS WELL
Meanwhile, weekly slaughter steer prices in the Southern Plains have followed the trend of lower boxed beef prices for the last two years.
Cattle prices crossed the 2010-2014 average the third week of June. They made a stab at re-crossing to go above the five-year average in July, but since average prices were working higher then, it was a no-go.
Seasonally, fed cattle prices tend to go up from the low in mid-June, only to dip again in December when retailers and restaurants have their coolers full for the season. Then, there is a late-December push for meat that translates into higher cash cattle markets.
Projecting the trend in beef and cash cattle markets, then, seems straightforward. The trend is lower unless something changes either supply or demand.
SOME POSSIBLE GAME CHANGERS
Among the things that could change the outlook for lower beef and cattle prices are a boost in domestic demand and/or a rise in US beef’s popularity in export markets.
Domestic demand is not likely to improve much beyond the USDA World Outlook Board’s projection for per capita consumption of 55.4 pounds in 2016 followed by 55.8 pounds in 2017. The 0.4-pound increase will help, but it isn’t the jump needed to turn the wholesale beef and cattle markets higher.
Besides, the projected increase in per capita US beef consumption is based partly on projections for product prices to remain low.
Export markets may move more US beef out of the country over the next year, but currency (buying power) issues in those countries may get in the way. Outright demand for US beef there may be questionable as well, since per capita consumption likely won’t rise any faster than US consumption, if that fast.
CASH CATTLE MARKETS QUIET
Cash cattle markets Tuesday were quiet after trading last week $98 to $98.50 and at $102 per cwt on a live basis and at $154 dressed, compared with the previous week’s $98 live and $152 to $156 dressed. There were no confirmed bids with offers at $105 live and $165 dressed.
The USDA’s choice cutout Tuesday was $1.09 per cwt higher at $182.07, while select was up $1.75 at $168.92. The choice/select spread narrowed to $13.15 from $13.81 with 107 loads of fabricated product sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Monday was $119.68 per cwt, up $0.20. This compares with Tuesday’s Oct settlement of $121.55, down $0.82, and Nov’s $122.65, up $0.12.