Between last week's neutral to somewhat bullish USDA Cattle on Feed report, the impeccable beef demand that's continuing to drive boxed beef prices higher and the $2 to $5 advancement seen in the cash cattle market, bull spreaders are continuing to rally throughout both the live cattle and feeder cattle markets.
Last week in the live cattle market, traders allowed the contracts to advance slightly while they patiently waited for cash cattle trade to develop. It wasn't until Thursday and Friday that cattle began to trade, but the wait was worth it, as prices were higher in both regions. In the North, dressed deals ranged from $257 to $262, mostly at $260 to $262, which is $3 to $5 higher than the week before. In the South, live cattle traded at $164 to $164.50, which was $2 to $2.50 higher than the previous week's weighted average. Feedlots' ability to continue to drive cash cattle prices higher stems from thin market-ready supplies as well as phenomenal demand. Throughout last week, choice cuts averaged $286.64 (which is $10.98 higher than the previous week), and select cuts averaged $273.10 (which is $12.15 higher than the week before). Given where the market sits with supply and demand mechanisms, higher prices should continue to be the theme of the live cattle market, so long as demand persists.
Last week, the feeder cattle complex traded steady to $5 higher, though true hard yearlings sold higher, as their type are in thin supply. The continued support from the live cattle market helped feeders continue to nudge higher, but one of the market's biggest limiting factors has been high inputs. On Wednesday of last week, the corn complex began to trade lower and continued to do so into this new week. Corn prices are still high compared to years past, but any downward fluctuation is warmly welcomed by feeders, as it helps their cost of gains immensely.
All in all, the cattle complex is rallying while the market sees the cyclical shift in supply, as the U.S. possess fewer cattle than in recent years. So long as moisture continues to accumulate and demand remains unwavering, higher prices should continue to propel both the live cattle and feeder cattle contracts higher.
ShayLe Stewart can be reached at ShayLe.Stewart@dtn.com
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