After testing the early-October low near 128 cents per pound, December cattle futures rebounded to 135. No cash trade has been reported yet this week. Southern Plains fed cattle traded from $134 to $135/cwt last week and even with the recent uptick, futures are only holding a modest premium to cash. That gives futures room to bounce back further. We look for fed cattle prices to move up to the $140 area over the next four to five weeks.
Beef prices were $3 to $6 per cwt lower this week. While the pullback may temporarily hold fed cattle prices in check, it should stimulate wholesale buying interest as the holiday season looms.
Carcass weights remain worrisome, but fed cattle supplies should tighten through year end. Domestic demand is expected to improve, whereas exports have been weak and recent dollar strength continues to be a constraint.
In this month’s WASDE update, USDA lowered its 2015 and 2016 beef production forecasts slightly based on slower expected marketings through late 2015 and early 2016. Production in 2015 is now projected at 23.715 billion pounds, down 79 million from last month while 2016 is now forecast at 24.85 billion pounds, down 110 million from October, but up 4.7% from this year. USDA made no changes to the price forecast. Steer prices for the five areas are forecast to average $141.5/cwt, down from $149.19/cwt this year.