Analysts are watching counter-seasonal trends in fed cattle and the beef cold storage situation to see what it might mean for cattle markets for the remainder of the year.
Andrew Griffith, University of Tennessee ag economist, says the finished cattle strength is not typical for this time of year.
“The finished cattle market is maintaining its contra-seasonal price strength as prices this week are trading in the range where they spent most of the spring,” he says in his weekly market outlook. “Cattle feeders are sure to be enjoying the strength in the market, but they appear to be using most of their price gain in the finished cattle market to purchase feeder cattle.”
Griffith says feeders have an eye to the February live cattle contract and says live cattle futures contracts are helping move feeder prices higher.
“Cattle entering the feedlot the next several weeks will likely come off feed in January or early February,” he says. “The February live cattle contract is trading near $137, which is a $16 gain over the current market.” The June cold storage report, released in late July, shows a decline in beef in storage.
“The current quantity of beef in cold storage is the lowest quantity since October 2014 when U.S. beef cattle producers were growing the cattle herd at a rapid pace and slaughter levels were significantly lower,” Griffith says.
This action generally follows typical trends, he says.
“It is typical for the quantity of beef in cold storage to decline the first half of the year before cold storage stocks begin to increase the second half of the year,” Griffith says. “This trend is largely due to seasonal supply and demand factors, but the rather large reduction of beef in cold storage the past six months has primarily been driven by demand and extremely strong wholesale beef prices.”
However, Griffith says it could be a little more difficult to restock storage supplies this year.
“The strong wholesale beef prices may make it difficult for stocks of beef in cold storage to increase the next several months as product continues to be cleared,” he says. “Cold storage stocks are likely to begin increasing in July, but the rate of increase is expected to be slower than is typical.”