Cattle markets continue to remain in consolidation trade, as most contract months have held in a $5.00 range for nearly two months. Consolidation looks likely to continue as the market is looking for news to justify a price break-out in either direction.

The cash market tone should keep the market supported overall, but the concerns regarding consumer demand and the U.S. economy may limit the near-term upside.

Front-end cattle supplies keep the market cautious

Front-end cattle supplies keep the market cautious. Recent slaughter numbers have been up from year-ago levels. Hence, those larger supplies are keeping a lid on the cash market.

Last week cash cattle trade was steady to firm. The Southern Plains saw cattle sell for mostly $137, steady to $1.00 lower than the week prior, and Northern cattle sold anywhere from $147 to $151, which was steady to $1.00 higher than the week prior.

Looking ahead for the short term, traders remain concerned that extreme heat across the central Plains over the next two weeks could keep cattle weights on the decline, which might cause production to come in below trade expectations.

Demand has been slowing for exports

The USDA released weekly export sales last week on Friday morning (released a day late due to the holiday) posting new sales of only 1,000 MT for 2022, down 35% from the previous week and 30% from the prior 4-week average. Top buyers of U.S. beef last week were Japan, South Korea and Canada.

Lower numbers heading into year end is supportive for deferred contracts

Herd liquidation had been the name of the game in the second quarter as pasture conditions suffered and feed costs remained high. Because of this trend, it is expected that third quarter beef production may be up 1.6% from last year. However, heading into fourth quarter, that sentiment changes as beef production is expected to be down substantially from year-ago levels.

The USDA suggests that fourth quarter beef production may be down 345 million pounds from the third quarter as compared with an increase of 127 million pounds last year. This will be the largest decline since 2008, and the drop in production may keep deferred contracts with a supportive tone. 

The other question becomes will the curse of higher interest rates and still high inflation talk cool the tone of demand or will the smaller production numbers keep prices supported.

Overall, in the short term, the cattle market is likely set to continue to consolidate, looking for one of the above factors to justify a breakout mover either higher or lower. In the short term, trade will continue to eye the cash trade on a week-to-week basis to find price direction.

Reach Naomi Blohm at 800-334-9779, on Twitter: @naomiblohm, and at [email protected].

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