Cattle futures were under heavy selling pressure again this week as cash prices weakened further. Fed cattle began trading at mid-week with Nebraska at $118/cwt, down $5 from last week. Kansas was also down about $5 at $119/cwt. This kind of weakness in the cash market surprised most in the industry. Beef prices were steady to lower, but don’t justify such extreme cash market losses. On a positive note, lower beef prices did trigger increased buying interest as the volume of wholesale beef trade increased significantly at mid-week.
Nearby December futures fell to a three-year low near 118 cents/lb and the February contract made a new contract low at 122.375 cents before mounting a late-week comeback. Look for cattle futures and cash prices to soon establish a low and turn higher into 2016. A correction could quickly carry February futures back to the low 130s.
In the monthly supply/demand update, USDA actually cut beef production slightly for 2015 and 2016 based on reduced slaughter and lower feedlot placements. However, USDA slashed the price forecast for 2016, cutting price forecasts for the first three quarters of 2016 by $5/cwt, with prices averaging $131/cwt in Q1, $139 in Q2 and $138 in Q3.