Sort & Cull

It's been a wild market to track as both the live cattle and feeder cattle futures have endured severe volatility, all the while boxed beef demand is seasonally rallying as it was expected to and fed cash cattle prices continue to soar to new highs weekly. But the market's innermost core seems almost like a combination of gasoline and fire -- you should be aware of this and how it may affect trade in the week ahead.

First, ahead of next week's long Memorial Day weekend, there's a chance the fed cash cattle market may not trade higher this week as packers would be buying for a smaller run. The cash market has been on fire recently, gaining a little over $16 in just the last three weeks alone. Last week, Northern dressed cattle traded at mostly $410 to $415, which is $7 to $12 higher than the previous week's weighted average. Southern live cattle traded at mostly $260 to $263, which is $3 to $5 higher than the previous week's weighted average; both those weighted averages are new all-time highs for the cash market. Last week's negotiated cash cattle trade totaled 89,722 head. Of which, 68% (60,954 head) were committed to the market's nearby delivery while the remaining 32% (28,768 head) were committed to the market's deferred delivery option.

Second, the market is right up against resistance pressure. In the spot August live cattle contract, the resistance threshold at $249.50 has been too intimidating for traders to successfully conquer. In the spot August feeder cattle contract, the market remains trapped between its 40-day and 100-day moving averages as traders simply don't see enough immediate support in the market to challenge that barrier.

Last, but not least, Friday, May 22, the monthly Cattle on Feed report is set to be released. Whenever that report is scheduled to be unveiled, traders typically operate in a more cautious manner as they don't want to be caught in a vulnerable position if something unforeseen is noted in the report. To that point especially, there have been rumblings throughout the marketplace already that there's a chance placements could be higher than assumed as drought has pushed a lot of cattle into feedlots earlier than normal this year.

It's incredible to see what the fed cash cattle market has accomplished over the last week and there are plenty of reasons why someone could argue that they're still bullish about the marketplace; but even those who are bullish long-term know and recognize the challenges at the door.

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

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