Cattle markets show mixed post-holiday signals

Cattle markets benefited from some beginning-of-the-year positivity to start the week, before finishing on a lower note, but overall were quiet coming out of the holidays.

Even with losses on Friday, deferred live and nearby feeder futures contracts still finished with week-on-week gains. Last Friday saw the live cattle markets above the 100-day moving average, which had been a strong point of resistance for multiple weeks. They maintained those levels, finding support at the 10-day moving average to close the week.
Cash trade developed at $232 to mostly $233 in the north and south after many feeders passed on bids earlier in the week.

Packers pulled back on activity, slaughtering 553,000 head compared to 585,000 to 595,000 prior to the holiday stretch. With the recent uptick in cash and a cutout that did not find much traction over the holidays, packer margins have deteriorated significantly. This will likely keep kills subdued over the next week or two as packers attempt to strengthen the cutout price. Seasonally, that is a typical pattern from the beginning of the year to the end of January. If reduced kills cannot add value to the cutout as we move toward the end of the month, the demand story could warrant additional discussion.

Related: Cattle markets plunge on false New World screwworm rumors

Two other factors bear discussion: Screwworm and a proposal emerging from the dairy industry. USDA APHIS updates its reporting of screwworm cases detected within 400 miles of the US border every Thursday evening. This week’s update included 14 new cases, the most since reporting began back in July, including two more cases in the state of Tamaulipas, which borders Texas. Many of these cases continue to crop up in young calves, underscoring that the flies are moving north rather than occurring in older cattle transported from southern states where screwworm is running rampant.

The second topic: A proposal floated by a dairy industry group in California aiming to reduce beef prices through a dairy cow culling program. It’s just a proposal, and dairy industry sources aren’t sure it will gain traction. However, if implemented, a program along these lines would likely affect cattle and dairy markets.

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