Sort and Cull

The cattle complex has been a nail-biting market to watch the last two weeks. The futures complex has been extremely supportive of the market's desire for higher prices, and once traders saw continued support from both boxed beef prices and the market's cash cattle trade, they faithfully advanced the market week in and week out.

In fact, the spot June live cattle contract has scored new contract highs in both of the last two weeks.

But aside from tremendous beef demand, the market has been well supported fundamentally by the continued advancement of the fed cash cattle market. Two weeks ago, Southern live cattle traded $5 to $6 higher, while Northern dressed cattle traded $9 higher. This past week, Southern live cattle traded at mostly $209 to $210, which is steady to $1 lower than the previous week's weighted average.

Northern dressed cattle traded at $335, which is steady with the previous week's weighted average as well. However, regional packers paid as much as $345, which is $10 higher than the previous week's weighted average.

Packers loathe having to pay more money in the cash market for cattle, but they can't afford to be too short bought when beef demand is helping drive boxed beef prices higher and higher. Strategically, during the past two weeks, packers have secured a large number of cattle to the nearby delivery. Two weeks ago, packers were able to commit 83,685 head to the one-to-14-day delivery period. Just last week, packers bought another 62,630 head in the fed cash cattle market, with 58,853 being committed for the nearby delivery.

I write this to let you know that feedlot managers could have a tougher time marketing their showlists during the next week or two.
Not only is the board more cautious than it was just a couple weeks ago, but packers have also successfully bought up inventory, which could lessen their immediate need of cattle.

Given where the market sits regarding time, packers will still need to support the cash market to ensure that they aren't short supplied later into April. However, it's very likely that packers will try to keep the cash market from inching higher this week. New showlists appear to be mixed, higher in Kansas, somewhat smaller in Texas and lower in Nebraska/Colorado.

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

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