Long before the market traded the last calendar day of 2022 and embarked on 2023, cattlemen and traders knew that there was going to be more upside to be had in the year ahead. With the beef cow herd reduced to historic levels, the market's leverage is finally going to belong to cow-calf producers and feedlot managers/owners in 2023, and potentially even into 2024 and 2025.
So, I ask you, is this the breakout week for the cattle market?
I'm as anxious as a small child at Christmas to see Tuesday's cattle inventory report. With beef cow processing as rapid as it was through 2022, I don't think it's out of line to anticipate that the January 2023 beef cow herd could be below 29 million head, which happened in 2014 and is the record low for the industry.
If we now possess the fewest number of beef cows since the Cattle Inventory series began back in 1972, the list of unanswered questions that the market will have to sort out is endless. We know that the market runs in cycles, but will the upcoming build-back phase be as aggressive as it was after 2014? Will the market bow down to the feeder cattle highs made in 2014 or will unbridled demand send prices above and beyond what we can fathom today? And when will female prices start to reflect the market's current reality?
To answer one of the questions posed above, I think this week could see substantial action in both the live cattle and feeder cattle markets. First, I find it especially supportive that the psychological component of marketing fat cattle is changing. Last week's market waited to trade cattle until Friday, and when the market is weak and flooded with too many market-ready cattle, it's not uncommon to see trade develop as early as Monday afternoon. But as feedlots sit and appraise the market's position, they're growing stronger and marketing their cattle as such.
Second, from a technical standpoint in the live cattle complex, traders are itching for the go ahead to blow past current resistance levels, so long as the market's fundamentals will support the venture.
Lastly, even though it makes for tough calving conditions, the country has been blessed with moisture, which could potentially ease drought constraints heading into spring.
On Feb. 1, my "Call the Market" column will exclusively cover Tuesday's cattle inventory report and the reactions we could expect the market to have based on its findings.
I look forward to riding this wave alongside you!
ShayLe Stewart can be reached at ShayLe.Stewart@dtn.com
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