By Joanna Newman
TOWARDS the end of last week cattle futures prices rallied to their highest level since June, before easing off again this week.
The Chicago Mercantile Exchange December live cattle contract (for fat [finished] cattle ready for slaughter) rose from around 64.5¢/lb a week ago to just over 66¢ (87p/kg) on Friday. However, prices retreated to close at 65.7¢/lb on Tuesday, 27 October.
The market was led higher by hopes of a further rally in the cash prices paid by the packing houses. However, in the absence of aggressive buying interest from the slaughterhouses, the cash price stagnated and this depressed the futures once again.
Packers are currently bidding 63¢/lb against offers of 64-65¢/lb. While this is unchanged from last week, the market was at 57¢/lb just a month ago.
Producers are hoping that oversupply is finally being redressed and prices have bottomed out. Cattle slaughter in the first nine months of the year rose 3% from a year ago to 1.2 million head. This is an encouraging sign that the industry is clearing its backlog.
Fewer feeder [store] cattle are entering the feedlots and grain is expected to remain cheap, both factors which should support cattle prices. However, average slaughter weights have risen 3% from last year to 1200lb/head (545kg) and this is adding to the amount of beef being produced. Heavy weights will continue to burden the industry for several months, some analysts warn.