The Cattle Range Home Page
November 3, 2017
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Fed Cattle Market... Cash Takes The Lead

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Fed Cattle Market... Cash Takes The Lead
Cassie Fish -- cassandrafish.com

Negotiated fed cattle prices barreled higher again this week, putting on at least another $6 live than last weekís sharply higher prices. Packers aggressively competed to procure the right kind for the right time, as production for holiday items reaches its zenith over the next 5 weeks.

Packers have been quite reluctant to back down fed kills to levels that would be more easily supported. In other words, there are enough market-ready fed cattle available to easily kill more than 485k per week. Market-ready supplies have declined seasonally but the packer has refused to adjust his production schedule, preferring instead to pay up for cattle.

As tends to be the case, futures have led the way, followed by cash and bringing up the rear, the cutout. Packer margins arenít the only thing that has narrowed this week as the basis has as well. Is this a sign the rally is reaching maturity? It depends. Certainly, seasonally a high near Thanksgiving would be typical but thatís a couple of weeks away.

The more important question is whether cash has topped this week. Were packers able to procure, yesterday and today, the cattle to cover the next two sizable kill weeks on deck? Or in cattle market speak, were there enough to go around? Itís difficult to know at this juncture and it will be a bit clearer when the total trade volume is tallied, but there are fewer captive supplies now than in recent months, so the need to buy in the negotiated market is greater.

As this morning has worn on, packers have indicated they are full and have backed up bids and required time to pick up cattle. But how much of this is a bargaining tactic and how much is factual is unclear. It is certainly understandable that packer will try to slow down the firestorm in cash cattle price advances, as $12 in 2 weeks is a chunk.

CME cattle futures posted daily reversals yesterday but have recovered well today. One only needs to view a weekly chart to see that futures still have upside potential, despite being overbought. Next week may see consolidation of this weekís gains, but until the cash market has clearly topped, this remarkable Q4 rally has yet to culminate.

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