Is The Seasonal Rally Topping?

There is little arguing the effect strong beef demand has had on the fed cattle market this year, underpinning prices in the face of active slaughter and more beef production, but the party may be nearing a seasonal end.

In a market analysis for Beef magazine, Cattle and Beef Industry Consultant Nevil Speer said the cattle market shows signs of life, but let the buyer beware.

In October, the cattle market broke out of a string of six straight weeks when cash cattle traded in the Plains at $110 to $111 per cwt on a live basis.  Such a flat market is unheard of in the cattle markets, Speer said, but a look at a graph of the five-market weighted average of weekly USDA slaughter steer prices shows the market more or less held in this range from about the first of July.

In mid-October a break finally came as cattle feeders managed to wrest another $3 per cwt out of packer buyers, taking the market back up to $114.  Prices made it up to $115 in the first week of November.




Speer said in his analysis that beef demand was strong in domestic and international markets –- and it is.  Beef demand, especially for choice graded beef, has been good all year and has been credited by many for the underpinning of the product and cattle markets in the face of strong slaughter rates and ample beef supplies.

He said the established cattle lows over the last three years have been $180, $191 and $203 in 2016, 2017 and 2018, respectively, all of them coming in September and October.  Again, he credited strong beef demand for this support.

However, is the market in the throes of a seasonal holiday rally or near the apex?

To look at the uptrend in the USDA’s weekly boxed beef cutout value for choice 600- to 900-pound carcasses, it would be easy to say demand is pulling beef prices higher.  But the beef cutout last year peaked last week and headed lower as buyers pulled back, confident they could get their last-minute supplies from the spot market.

And the 2012-2016 average boxed beef price shows a seasonal peak even earlier in November with a challenge of that peak coming in early December.  The secondary peak coincides with retailers picking up a few extra loads to fill in for the post-Thanksgiving demand and to get ready for the New Years’ surf-and-turf features.

Speer pointed out that the Oct. 1 Cattle on Feed report had the number of cattle on feed at 11.4 million Oct. 1, the largest for that date in history.

Beef demand had better remain good.




Cash cattle traded Wednesday at $110 to $112 per cwt on a live basis, down $3 to $5 from last week, while dressed-basis trading was reported at $175 to $176 per cwt, down $3 to $4.

Then cash cattle traded Friday at mostly $114 per cwt on a live basis to $114.50, steady to down $0.50 from the previous week.  Dressed-basis trades were reported Friday at $178 per cwt, steady to down $2.

The USDA choice cutout Monday was up $0.48 per cwt at $213.39, while select was up $1.00 at $198.57.  The choice/select spread narrowed to $14.82 from $15.34 with 92 loads of fabricated product sold into the spot market.

The CME Feeder Cattle index for the seven days ended Friday, was $147.09 per cwt, down $0.74.  This compares with Monday’s Jan settlement of $147.27, up $0.75.