Call the Market

Since Friday, March 7, the live cattle complex has posted an impressive rally, which allowed the spot April contract to successfully reconquer its 40-day moving average. It has been attainable because of last week's higher trade in the fed cash cattle market and improved beef demand.

While it may be a tick early for seasonal beef demand to be gaining momentum, the market clearly indicates that demand is indeed improving. On March 3, choice cut closed at $313.93, and by March 11, the cut had rallied $7.27 to $321.90. Although the price jump hasn't been as significant, the select cut has also rallied. On March 3, the select cut closed at $302.41, and as of March 11, the cut had rallied $4.45 to $306.86.

The market could see some mixed signals from consumers until grilling season is fully underway, but it's important to keep a close eye on boxed beef demand as it will directly impact the fed cash cattle market.

Packer margins have been under severe pressure with fed cash cattle prices trading at or around record high prices. Consequently, they've reduced throughput to avoid needing to support the fed cash cattle market consistently, and in hopes of driving up beef prices as they ration end-user supply.

If beef demand continues to improve, there's a high likelihood we could begin to see better interest in the cash market as packers will want to sell more beef at these improved prices.

Last week, Southern live cattle were marked anywhere from $196 to $198, which is $1.00 lower to $1.00 higher compared to the previous week. Northern dressed cattle sold for mostly $315, which is $2.00 higher than the previous week's weighted average. Last week's negotiated cash cattle trade totaled 74,437 head. Of that 91% (67,915 head) were committed to the nearby delivery while the remaining 9% (6,522 head) were committed to the deferred delivery option).

No cash cattle trade has developed yet this week, but the stronger prices of boxed beef have feedlot managers hoping the market will again be able to trade steady to somewhat higher. Asking prices have been noted in the South at $202-plus, but are still unestablished in the North. It will remain critical to continue monitoring beef demand as it could signal which way cash cattle prices will trade and potentially dictate if processing speeds will increase or not.

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

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