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CME: Cash Fed Cattle Prices in W48/2018 Modestly Higher

05 December 2018

US - Cash fed cattle prices last week were modestly higher compared to the previous week, reports Steiner Consulting Group, DLR Division, Inc.

The comprehensive cattle report that was issued yesterday by USDA should offer some interesting insights in terms of fed cattle purchased for delivery in early December vs. later in the month.

In the report that was issued a week ago, we noted that packers paid a notable premium for cattle available for immediate delivery.

Will that happen again this week? Or did feedlots manage to close the gap and trade cattle closer to where Dec fed futures are currently trading?

In yesterday’s recap of fed cattle trading, USDA noted: "The latest established market in any feeding region was last week, with live purchases in the Texas Panhandle mostly at 118.00, with a few up to 118.50. Last week in Kansas, live purchases traded at 118.00.

"Last week in Nebraska, live purchases traded from 116.00-118.50 with dressed purchases from 183.00-185.00, For the previous week in the Western Cornbelt, live purchases traded from 114.00-116.00 with dressed purchases from 183.00-186.00."

December fed cattle futures are currently below current fed cash market, maybe reflecting market uneasiness about demand after holiday purchases are completed. However, it does appear that feedlots have managed to stay current despite more fed cattle on feed.

The charts below show both the average weight of fed steers coming to market as well as the percentage of yield grade 4 & 5 cattle in the mix.

The latest steer weight data is for week ending 13 November, showing the average weight was 900 pounds per carcass, 4 pounds lower than the week before and now 2 pounds under what they were a year ago.

However, with cattle placed on feed at lighter weights last spring maybe the carcass weights at slaughter may not be the best measure of currentness.

The top chart shows the percentage of yield grade 4 and yield grade 5 cattle coming to market. Back in September, when we last updated the chart, there were signs that the percentage of poor grading cattle was increasing, indicating fed cattle were not as current as the weight data would suggest.

However, it appears the situation changed in October and the percentage of Y4 and Y5 cattle counter seasonally decreased. The steer weight data is available only through 13 November but based on the mandatory price reporting information available, we think average steer weights have continued to decline in the last two weeks and they will likely be even lower this week.

Packers will likely need to buy more cattle in the spot market in December than they bought last year. At the bottom of this page, we have updated one of our regular charts showing the number of cattle packers have purchased for forward delivery, by delivery month.

For December 2018 packers have secured 161k cattle for delivery in the month compared to 205k last year and 225k they had secured in 2016. Their position for Jan/Feb is shorter than the previous year, as well.

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