Steer Prices Near Seasonal Flat Phase

Slaughter steer prices in the Southern Plains last week took an unexpected turn upward as profitable packer margins and an impending long holiday weekend encouraged packers to pay up.  It could be the start of a trail of seasonal price stability into December.

The five-year average of USDA Southern Plains fed cattle prices flattens out at this time of year, oscillating very little until it dips briefly in early December.  Taking the pattern at face value and beginning with last week’s mostly $155-per-cwt cash price, a mostly $155 price could be inferred as the norm through November.

However, this year’s tight supplies of fed cattle could make this year’s pattern more like last year’s in that prices kept rising into late October before leveling off.  Short-supply markets are always more volatile and unpredictable than the average.

After last week’s unexpected price bounce, some sources now are calling for this week’s cash market to be up from last week and carry a premium to the Oct futures contract, which closed Tuesday at $152.42 per cwt.

Average basis records, though, show something different.  The average basis kept by the Livestock Marketing Information Center for the week ended Sep. 6, is a minus $2.38, meaning if futures hold at Tuesday’s settlement, cash cattle could trade down to around $150.

That’s not likely to be the case, given the positive basis the market has seen in all but one week this calendar year.  For the reported weeks in August, the basis averaged a positive $6.16 with the week ended Aug. 23, the last reported week, at a positive $5.78.  If the basis holds there for this week, it could project a cash price of $158.20 this week, which may not be plausible either, except that the basis tends to rise at this time of year.




But if cattle feeders thought they could push prices and really cash in on the market, the feeder cattle market also turned higher last week to discourage such thoughts.

The USDA reported 700- to 800-pound medium and large No. 1 feeder steer prices in the Southern Plains last week at $223.49 per cwt, up $5.70, or 2.62%, from $217.79 the previous week.  The market appears to have corrected after hitting a record high $229.59 in the first week of August and may now be headed higher again to challenge the record.

Southern Plains prices for 400- to 500-pound medium and large No. 1 steer calves also bounced last week to $223.49 from $217.79 the previous week.




Also dragging on fed cattle margins for packers are sagging beef prices.  The USDA’s choice boxed-beef price Tuesday declined $0.19 per cwt after an attempt to move slightly higher at midday.  It ended at $246.11, down $2.37, or 0.95%, from $248.48 a week earlier.

Select beef ended Tuesday down $0.56 at $233.83, off $4.65, or 1.95%, from $238.48 a week earlier.

The choice/select spread continued to widen Tuesday to $12.28 from $11.90 on Friday.  It continues to widen seasonally as the percentage of choice production rises against the percentage of select.

Meanwhile, rising slaughter weights continue to support beef production and limit the number of slaughter cattle packers need to fill beef orders.  Live weights last week averaged 1,330 pounds, up four pounds from just the previous week’s average of 1,326 and 1.37% above last year’s 1,312 pounds.

It appears those rising weights in conjunction with declining beef and byproduct values may thwart last year’s cash cattle price tendencies and keep fed cattle prices somewhat level for the next couple of months.