The cattle market apparently put in an important low in early October. Cash, futures and beef prices have all turned significantly higher, reinforcing the recovery in the cattle market. The five-area average price last week shot-up $7.64 per cwt to $125.35 while dressed prices averaged $8.44 higher at $195.92. December live cattle futures rebounded nearly 11 cents per pound from the Oct. 1 low near 128 cents to this week’s high around 139 cents. After posting the early week high, futures drifted lower as the market consolidated recent gains.
While beef prices haven’t led the recovery, they have closely followed. Choice cutout is nearly $8/cwt higher than a week ago at $210.61. Select is similarly higher at $205.62. The sharp decline in beef prices triggered buying interest from retailers. Beef demand should also improve seasonally through fall and winter, which should underpin prices.
One factor that contributed to the price weakness during August and September was higher carcass weights. While still far above year ago levels, the recent slaughter data show that steer carcass weights edged down 3 pounds from the previous week to 920 pounds. It’s only a modest decline, but it suggests a dent is being made in the backlog of market-ready cattle.
We expect the early October low to mark a major turning point for prices, a level that should hold for at least several months if not years. December futures might reach the 140-141 area over the next 30 to 45 days.