Price action: Nearby live cattle and feeder futures ended the week at fresh all-time highs. October live cattle surged $1.45 to $186.925 at the close; that marked a weekly advance of $3.70. October feeder futures jumped $2.60 to $264.475, which represented a weekly rise of $5.325.
5-day outlook: Despite this week’s wholesale slippage, which saw choice cutout drop about $6.00 from last Friday’s close to today’s midsession quote at $306.36, it looks as if cash and futures prices will rise significantly. It was uncertain if the southern markets would post gains for the week since early-week trading was minimal (while cash trading in the north was a moderately active at higher prices), but today’s follow-through futures surge will likely trigger increased activity at commensurately higher prices in the south. And given the persistent tightness of market-ready feedlot supplies, as well as probable diminished availability of contracted animals to packers, this seemingly bodes well for another cash advance next week. A wholesale market rebound would improve the chances of sustained cash and futures gains as well.
30-day outlook: The 10-year average implies cash cattle prices tend to decline from an early-August high into early-October, but this week’s apparent rise suggests the market won’t follow the historical norm in the weeks just ahead. Given the tightness of market-ready feedlot supplies, as well as the premiums built into the fourth-quarter futures contracts, a short-term cash rally appears more likely. This week’s robust consumer spending data also diminishes concerns about record-high retail beef prices strangling consumer demand in the short term.
90-day outlook: Despite the meat and grocery industries’ increasing focus on turkeys and hams as the holiday season looms, seasonal factors also suggest the rally in fed cattle values will persist through the end of the year. The average gain from around October 1 through the last week of December averaged about $11.00 during the past decade. A similar rise from last week’s cash quote is built into December futures. We still harbor concerns about the strength of consumer demand if grocers continue boosting retail costs to fresh records and worry that the premiums built into the winter-spring contracts will cause producers to allow fed cattle to build up in their lots, which in turn could eventually undercut the whole cattle/beef complex, but such changed circumstances are not showing up at present.
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