Sort & Cull
Livestock Market Sets Out to Recover
After last week's bloodbath-like trade, the three livestock contracts (live cattle, feeder cattle, lean hogs) successfully traded higher through Monday's end. We know that the Fed has promised higher interest rates as a cause-and-effect scenario to tame the nation's uncontrolled inflation, but could it be possible that the market has carved out its low for the time being?
Moving through the last two quarters of 2022, feed prices, interest rates, drought, demand and any negative developments regarding our fragile economy will affect the livestock complex. In terms of live cattle, especially, the market's fundamental outlook remains favorable.
To support that claim, let's look at the following points.
First, even though last week's market saw the boxed beef complex remain pressured as choice cuts averaged $246.73 (down $3.32 from the week before) and select cuts averaged $220.74 (down $3.40 from the previous week), the sheer volume of sales helped offset the boxes lower prices. Second, both packers and feedlots alike know that market-ready supplies of cattle are only going to become thinner moving forward. Over the last two weeks, it's become evident that packers are soberly aware of this reality and they're trying to avoid becoming short bought in the weeks ahead by buying aggressively now.
Two weeks ago, the negotiated cash cattle market traded right over 116,000 head, and this past week the market saw right over 100,000 head trade. The downfall to this is that the cash cattle market won't be able to run higher like a runaway train, as packers have padded themselves strategically with cattle, but they'll have to keep with this vigorous buying nature to ensure their security.
Lastly, even with the U.S. dollar growing stronger, beef exports have yet to show signs of weakness. Year to date, the United States has exported 2.09 billion pounds of beef, which is 6.8% higher than what the market had exported in 2021.
As we saw last week, the market can change, spin and turn on a dime, but given that the contracts have seemed to find some technical support and are still looking at a favorable fundamental outlook, it would appear as though the market could trade higher as long as no unexpected surprises arise from outside pressures.
ShayLe Stewart can be reached at email@example.com
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