National pork month kicks off
New contract lows were noted today. For the dominant December contract this was also a new low close. A moderate part of last week's price break came from the Monday showlist which indicated 31,000 more cattle than the previous week. Last week's average was $102, down $3 from the previous week. Last week's showlist purchase makes this week's slaughter. That means you will have another week near, or just above, the year's current 613,000 head peak. However, today's showlist count was 17,000 head smaller than last week.
We still hold that there is a chance for a temporary period of lower supply and higher pricing into Oct/Nov. That may be the last chance to sell 2017 cattle.
Economists will note that current cash cattle trading, this whole year actually, is not exactly trading just the higher beef production we have. This market is also trying to price in that big washout supply that we all expect for 2017...right now. It is interesting to see how focused this market is on the big picture.
So far we have broken prices 43% from the 2014 peak. That $80 price that much of the industry is discussing for next year's potential low would be 53% off the 2014 peak.
For medium term pricing cattle feeders are asking us about buying calves and feeders. The easy answer is, don't. Why hold cattle unhedged going into a multi-year low? For those saying they will hedge will you a) do so and b) actually keep it on?
The farmer share of the retail dollar has fallen to some tough levels. At the peak of the beef supply tightness a couple of years ago the live animal level was taking 58.2% of the retail dollar. That has fallen down to 41.9% in July and 42.8% in August. Low prices in 2015 and 2016 are just from the moderate increase in beef production, they are also due to a wholesale decline in retail dollar ownership. We are near the all-time low in retail share (41.0% in 2009).