Sort and Cull

If it feels as though the dog days of summer came out of nowhere, hitting the cattle complex head-on right before the big Fourth of July holiday -- your feeling is 100% accurate.

Aside from the miserable heat wave overtaking much of the U.S., the market has also felt the seasonal pressure of the commonly referred to "dog days of summer."

It's not uncommon for the cattle complex to feel pressured following the Fourth of July, as that's typically when boxed beef prices soften, supplies of fed cattle increase and affect the fed cash cattle market. Consequently, all these factors can negatively affect the feeder cattle market, even though supplies remain historically low. And following last week's deterioration of the market -- to the point where both the live cattle and feeder cattle contracts sank below their 100-day and 40-day moving averages -- expect the market to be cautious moving forward, as recovering positions above those thresholds is no easy task.

Last week, Southern live cattle traded at $248, which is $7 lower than the previous week's weighted average, and Northern dressed cattle traded at mostly $393, which is $10 lower than the previous week's weighted average. Boxed beef prices softened throughout last week's trade, as choice cuts averaged $383.39 (down $7.34 from the previous week's weighted average) and select cuts averaged $365.33 (down $5.41 from the previous week's weighted average).

Unfortunately, with packers able to secure 71,665 head in last week's fed cash cattle market, it's highly unlikely the fed cash cattle market will trade at anything better than steady prices again this week. Of the 71,665 head that traded last week, 80% (57,017 head) were committed to the market's nearby delivery, while the remaining 20% were committed to the market's deferred delivery option.

Long story short, hopefully the heat breaks soon, rain showers continue to chip away at drought conditions, and the market finds stronger fundamental support, because right now there's not enough support to keep the contracts from trailing lower.

ShayLe Stewart can be reached at ShayLe.Stewart@dtn.com

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