Cattle Market... Cash Takes The Lead
Cassie Fish --
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.
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.
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.
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.
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.
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.