The continued narrative of tight supplies of cattle in the United States has kept live cattle futures prices in a strong uptrend. Also supportive to prices has been the notion of strong domestic demand for beef for the first half of 2024. This combination of low supply and high demand has continued to keep live cattle futures prices near all-time high values.
Bull markets need to be constantly fed fresh, friendly fundamental news. The most recent Cattle on Feed report failed to provide anything that would be perceived as “over the top” friendly.
The July 19 Cattle on Feed report provided very few surprises. The on-feed number came in at 101% of a year ago, right on trade expectations. Also, right on expectations, was the marketing number, which was 91% of the year prior. A slight surprise to the market was the placement number coming in at 93%, which was below the estimate of 96.4%; however, that was within the wide range of estimates of 89.9 to 100.7.
From a marketing perspective…
Without a doubt, the cattle complex continues to enjoy overall price strength, with market prices for both live cattle and feeder cattle futures still trading near all-time highs. However, these lofty prices may be starting to lose their luster.
Now that the summer grilling season is wrapping up, American families are likely starting to shift their focus from “summer fun” to expensive “back-to-school” budgetary needs. That notion may be evident as daily beef cutout values have been sliding lower since early July. This is a sign that the consumer may be backing away from eating beef in the short term, opting for cheaper cuts of meat from competing protein sources.
Also weighing on price sentiment is that U.S. export sales of beef are down from year-ago levels. The lower numbers of exports are due to a combination of a stubbornly high U.S. dollar value along with higher priced U.S. beef in general. Also, the global competition remains robust, and according to Brazil’s Ministry of Agriculture, Brazil enjoyed record exports for the first half of 2024. Its exports were at 1.14 million tons, up nearly 30% from one year ago!
A sobering price reminder is that the U.S. also imports some beef annually. Traders have been so focused on tight supplies and strong domestic demand in the U.S. for the first six months of 2024 that they may not have noticed that imported beef amounts have increased. Recently the U.S. Department of Agriculture announced forecasts for overall 2024 beef imports at 4.171 billion pounds, nearly 12% higher than 2023 beef imports.
Prepare yourself…
Cattle futures are riding a four-year uptrend support line. The bullish fundamentals are now potentially being met with negative fundamental indicators. Where to from here? The cattle complex may be at a crossroads in terms of prices and price support. Think long term about managing both the risks and opportunities.
If you have questions, you can reach Naomi at [email protected] or find her on twitter @naomiblohm.
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