Last week's market was again fruitful for the cattle complex. Corn prices traded lower throughout most of the week, beef demand remained strong and cash cattle prices were able to trade higher again.
Come Monday, however, traders took the opportunity to advance both the live cattle and feeder cattle contracts aggressively. The spot April live cattle contract closed at $166.10, which is yet another new contract high. Even crazier yet, the spot April feeder cattle contract closed at $198.60, which is another new contract high too.
It's not farfetched to say bull spreaders are alive and well in the cattle complex and are continuing to encourage the cattle contracts to test their upper limits. But the big push now?
First, we cannot downplay the effects the corn market's recent price correction has on the cattle complex. While cattle prices in 2023 and 2024 are expected to be incredibly high, the frustrating nature of today's market is that, even with high prices, profitability still isn't guaranteed as inputs remain painstakingly high. Feeder cattle buyers are consistently monitoring any and all changes in their cost of gain equations (the price of hay, the price of corn, the price of distillers, freight, interest rates, changes in drug prices, etc.) as even the slightest change can pose a different outlook for their end margin.
Second, we cannot overlook the bullish rally that's currently taking place in the cash cattle market. Week in and week out, feedlots continue to work the market higher, which in return brings them more cash and gives feeder cattle buyers hope that paying high feeder cattle prices for calves will work out in the end.
Third, we cannot overlook how excellent beef demand has played a key role in today's market environment. I've stated before, February is usually a month when beef demand lags and packers expect to see pressured margins. But through this past month, excellent beef demand incentivized packers to continue to support the cash cattle market and consequently aided in feedlots gaining the majority of the market's leverage.
Needless to say, the market is hot and it's not likely that its direction changes anytime soon. Make the most of these prices, cattlemen!
ShayLe Stewart can be reached at ShayLe.Stewart@dtn.com
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