It may be difficult for cattle feeders to maintain the market strength to push prices higher than the seasonal top set the first week of November.
In that week, the weighted average fed cattle price was $124.70 per cwt on a live basis, according to the USDA’s Agricultural Marketing Service and compiled by the Denver-based Livestock Marketing Information Center.
The 2011-2015 average shows a peak coming the last week of October, so this year’s price pressure shouldn’t have been a surprise to traders, a market analyst said. The tendency is for prices to ease into the first week of December and then take a two-week dip.
Early data from the field show this week’s cash prices to be up $1 to $2 per cwt from last week at $120 to $121 on a live basis, but this still is about $4.20 short of the November peak of $124.70.
University of Tennessee Agricultural Economist Andrew Griffith said in the Nov. 24 Tennessee Market Highlights that it isn’t impossible to think cash cattle prices could surpass the early November high, but to get there, futures investors would have to “begin a buying frenzy.”
FUTURES PREDICT NEW-YEAR STRENGTH
This week’s early cash price of $120.50 per cwt is above Thursday’s Dec futures close of $119.90 — but only slightly, and the Feb and Apr delivery months give feeders hope for further gains in the first part of next year. Feb closed at $124.97, and Apr settled at $125.92.
As a result, some feed yards may try to keep their cattle on feed just a smidge (a very technical term) longer than they might otherwise. There is nothing to be gained by selling them earlier than their scheduled out-date unless the mild fall weather just pushes them to grow and fatten faster than expected.
However, after April the futures market predicts a sharp downturn in prices. The Jun contract settled at $118.55 Thursday, with Aug down even more at $115.22.
BEEF DEMAND STILL KEY
Whatever happens to fed cattle prices in the near future, it’s clear that beef demand will have to pull hard on the market to sustain the level of slaughter this year. Data show that federally inspected slaughter rates have been above last year and the previous five-year average consistently since mid-July.
Data show that total cattle slaughter dipped to seasonal levels the week of the Thanksgiving Day holiday, but daily data since then indicate this week’s weekly average slaughter rate should rebound.
A significant decline also can be expected for the Christmas and New Year’s weeks, but the lower beef production for these weeks is budgeted into packer slaughter schedules and likely will have little to no effect on beef markets.
CATTLE, BEEF RECAP
No trading took place on the Livestock Exchange video auction Wednesday. Cash trade was reported Thursday at $120 to $121 per cwt on a live basis, up $3 to $4 from last week and at $190 dressed, steady to up $1.
The USDA’s choice cutout Thursday was down $1.91 per cwt at $204.64, while select was off $1.63 at $184.21. The choice/select spread narrowed to $20.43 from $20.71 with 134 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Wednesday was $156.92 per cwt, up $0.11. This compares with Thursday’s Jan settlement at $154.17 per cwt, down $1.40.