Beef Market Update: Cash is king

The calendar has flipped into August and cattle producers are looking forward to the fall yearling and feeder run.

During the past week, live cattle struggled to gain momentum but ended up fairing better than lean hogs in the face of heavy selling of pork futures. There is a lot of pressure on hogs due to supply issues and an export market that has not bailed out the industry yet.

December 2019 Live Cattle Future. (barchart.com)

For cattle, Anne Wasko of the Gateway Livestock Exchange says the story is about the stronger cash market, as August cash cattle kept the futures’ market attention, trading at $108 this week.

The one month chart for December live cattle shows that for the last thirty days, the market has shown little willingness to move higher or lower, bound by a range of $111-114. December live cattle closed at $111.75 but the five-year-average for the contract is $129.69 at this time. The live cattle basis in Western Canada has improved from $15 to $20 under at the beginning of the year to par, but it has a chance to become positive based on past years’ experience for fall fed cattle in the region.

The same importance of cash over future scenario is developing in the U.S. corn market, as the opportunity for a price lift is more a function of the basis and cash than waiting for the futures market to lead the way.

Feeder cattle futures have been chopping around the low 140s but Wasko doesn’t really see much changing there. Many traders are watching the price of corn and wondering whether the long anticipated weather market will arrive — which will impact the feeder price into the future.

With less than two months of summer left, 1000 lb steers were in the low $180s last week ($5 to $10 lower than the same week last year according to Wasko). With a smaller yearling run this year, we can expect support for the yearling price.

Wasko reminds Western Canadian producers to watch the feeder cattle basis levels to firm in September and October which is typical.

Listen to RealAg Radio host, Shaun Haney and Anne Wasko of the Gateway Livestock Exchange,  full conversation in this weeks Beef Market Update. 

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