Foreman: Cattle futures struggling at recent highs

After an early week pullback, cattle futures turned higher, reaching a new seven-week high with December futures near 145 cents per pound and February at 146 cents. Fed cattle traded early this week at $138 in the southern Plains, steady with the previous week. The futures strength has carried prices to a significant premium to cash trade, which may be a limiting factor for further near-term gains. While beef supplies will tighten due to lower placements, cattle weights are at least partially offsetting production cuts. Steer carcass weight reached another new record at 928 pounds, thereby marking a 29 pound increase from a year ago.  

The Choice cutout is up $17/cwt to $220 from the low on Oct. 9. Lower wholesale prices seemed to spur demand, but the beef market still faces competition from lower-cost poultry and pork. Beef exports are also sluggish, down 12% so far this year due to slow global economic growth and high U.S. prices, along with strength in the dollar

The latest Cattle on Feed report indicated only a slightly higher than expected number of cattle on feed. Feedlot placements during September were down 4.1% at 1.931 million head. Trade expectations were for about a 6% decline. Cattle marketed were down 2.4% compared to trade estimates for a 3.3% drop. Cattle on feed as of Oct. 1 totaled 10.218 million head, up 2.3% from a year ago, but down 3.8% from the five-year average. While placements were down, placements of 800+ lb. feeders were up 7.8% from a year ago. The quarterly data also suggest that producers continue to hold back heifers. The percentage of heifers on feed as of Oct. 1 was 32.2%. Typically, the heifers on feed are closer to 37% to 38%.