Cash fed cattle prices may equal or surpass record highs this week. That’s a bold statement, and livestock economists are trained from an early age not to predict record prices. High expectations just tend to backfire.
Still, it’s important to note the current situation in the cattle markets, even if the government shutdown has made market-watching a challenge even for the most experienced information seekers.
Here are the facts as we know them: Last week feedyards sold cattle in the South at $128 per cwt., and a little higher in the North at $129.50. Feedyards will price cattle at $130 or higher this week, which is the previous record price for cattle headed to the packing plant.
Feedyards have plenty of reasons to support their ideas that fed cattle prices should climb higher this week. The first is the fact that October live cattle futures were knocking on the door of $130 during most of Monday’s trading. Further out, February 2014 live cattle are trading above $134, and April 2014 contracts are above $135.
Feedyard showlists are also declining, which suggests packers will need to work a little harder to find the cattle they need to fill their orders. The leverage has been shifting toward cattle feeders for a few weeks now, and that trend should continue through late winter.
Cattle feeders must also be optimistic as they continue to bid up feeder cattle. Market reporters have regularly called feeder cattle prices a runaway in recent weeks, and last week’s prices found gains of $3 cwt. Futures traders seem to share the optimism on feeder cattle as the October contract traded above $167 on Monday, and November and January feeder futures were both on top of $168. Cash sales last week in Kansas fell in a range of $167 to $172 per hundredweight for 750-pound feeder steers.
The contrarian view of the cattle markets this fall includes an examination of consumer acceptance. Retail prices have risen to all-time highs, and there’s plenty of concern that consumers may just skip the beef case in favor of pork and poultry. Boxed beef prices are trading flat as the price of live cattle has increased recently. That squeezes packer margins, and if they can’t sell the beef to retailers at higher money they’ll always be searching to lower bids on the live cattle.
Although recent beef demand has not shown signs that higher retail beef prices would be sustainable, a seasonal boost from cooler weather may support demand in the near term.
Given all the factors currently influencing the cattle markets, most analysts quietly expect this week’s cash fed cattle prices to be at or near the record of $130 per cwt. Many, however, question whether or not the market has the support to go beyond that mark.