Cattle futures and outside markets boost cattle prices

Calf and feeder prices finally reversed course this week. From mid-week onward—thanks to a rally in cattle futures--calves traded firm to $5 per cwt higher (instances of $10 higher) and yearlings brought $3-$10 more, according to the Agricultural Marketing Service (AMS). 

Wes Ishmael

October 9, 2015

4 Min Read
Cattle futures and outside markets boost cattle prices

Cash calf and feeder prices finally took a step higher this week—from mid-week onward—with calves trading firm to $5 per cwt higher (instances of $10 higher) and yearlings bringing $3-$10 more, according to the Agricultural Marketing Service (AMS).

Until futures caught fire with limit-up moves on Tuesday—followed by more strong gains on Wednesday and Thursday—cash prices continued down; $5 lower for yearling and $5-$15 lower for a light test of calves.

Feeder Cattle futures were an average of $9.82 higher across the board, week to week.

Arguably, the only tangible fundamental news during the week came from outside markets. The Dow Jones Industrial Average was 612 points higher week to week. The broader S&P 500 was up 63 points. The lower dollar also helped lift commodity prices. Crude Oil futures (WTI-ICE) were up $4.78 per barrel week to week.

“It seems too early to determine if a change in the market has found its bearings. The sharp move higher in cattle futures came without any positive news in the cattle markets or meat trade,” say AMS analysts. “A sustained or prolonged move higher would be far more important than a couple of large moves higher, but hopefully this is a start.”

Week to week, Live Cattle futures closed an average of $5.89 higher ($5.30 to $7.70 higher). The growing premium to futures over cash helped push cash fed cattle prices sharply higher. Late-day reports on Friday pegged live cattle sales at $126-$127 per cwt and dressed sales at $195-$197. Last week, live prices were reported across a wide spectrum of $114 to $124 with most sales on the lower side of the range. Dressed sales last week were at $185-$190.

That was despite wholesale beef value continuing to drift lower, albeit with some scattered stability. Choice boxed beef cutout value was $2.77 lower week to week at $203.00 per cwt. Select was $3.47 lower at $197.89.

“Even if we have a bottom in place in live and feeder cattle markets, feeder cattle prices still have headwinds to face after this sharp slide,” AMS analysts say. “Before the slide happened, it was unprofitable to place feeder cattle on feed and it will still be a struggle even now. There remain legitimate concerns in the cattle markets with consumer demand, competition from competing meat proteins and declining export sales (see “Export pressure continues”).”  

Analysts with the USDA Economic Research Service (ERS) raised forecasts for total meat production (2015 and 2016) in the monthly World Agricultural Supply and Demand Estimates (WASDE) released on Friday.

ERS analysts increased estimated beef production for this year based on forecasts for increased fed cattle slaughter in the second half of 2015 and heavier carcass weights. They increased estimated beef production for next year with forecasted increased cattle slaughter and heavier carcass weights in the first half of the year.

“Cattle prices for 2015 and 2016 are reduced from last month on current large supplies of market-ready cattle, weaker demand and competition from relatively large supplies of competing meats,” ERS analysts explained.

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WASDE estimates for fourth-quarter fed steer prices are $129-$135 per cwt. The annual average estimate for 2016 of $136-$147 is $9-$12 less than the September projection.

“The cattle business is now in uncharted territory,” explains Nevil Speer, BEEF market analyst, in his latest commentary. “As noted in prior months, the demand curve has enjoyed an extended positive run. However, that’s now being challenged, largely because of external factors far outside of the industry’s influence. Meanwhile, the beef complex is now forced to manage increased supply. And to cap it off, there’s an unprecedented level of capital at risk, which is now required to operate across all segments of the beef industry.”


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