Sort & Cull

Whether you talk to cattlemen or day traders, or someone who fancies themselves with the business in-between, we all learn tricks about the cattle market and how it trades along the way. And one of those tricks that the market full-heartedly respects is that whenever a Cattle on Feed report is set to be released, you'll typically note more caution in the market throughout the futures complex.

So, expect a cautious, more hesitant tone this week as traders brace for the USDA's monthly Cattle on Feed report.

This would be a different attitude for the market compared to recent weeks. The spot December live cattle contract has gained $12.12 since the first week of September, and the spot January feeder cattle contract jumped $19.65. Also, during the last six weeks, the fed cash cattle market traded higher. And, I believe the feeder cattle market especially has more room to trade higher in the weeks ahead with feed prices being cheap. Lastly, market participants know that supplies of feeders are going to be thin this winter.

It's expected the fed cash cattle market will trade steady this week as packers have been able to buy enough cattle for the deferred delivery option to successfully build up some supply around them.

Last week, the bulk of the fed cash cattle trade took place on Thursday as Southern live cattle traded for mostly $188, which was $1 higher than the previous week's weighted average, and Northern dressed cattle traded for mostly $296, which was steady with the previous week's weighted average. Last week's negotiated cash cattle trade totaled 78,941 head; of that, 77% (60,495 head) were committed to the nearby delivery while the remaining 23% (18,446 head) were committed to the deferred delivery.

I share this with you so you can hopefully make sense of some of the market's weaker undertone this week if that does indeed end up being the case. I believe that with the excellent consumer demand helping packers' bottom line the fed cash cattle market could again trade higher in the weeks to come. But, as everyone highlights the Cattle on Feed report that will be released late this week, expect to see more caution in the market.

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

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