Sort & Cull

Recovery in a War Zone?

John Harrington
By  John Harrington , DTN Livestock Analyst

Recovery in a war zone. That's what the early year implosion of outside markets suddenly feels like to beef producers only recently upgraded from "one-foot-in-the-grave" to "walking wounded." If the cattle market is truly on the mend, shouldn't it at least be allowed to convalesce beyond the fall-out of shrapnel and mustard gas?

Alas, the market is seldom mistaken for the International Red Cross, investment flights to safety rarely confused with the Geneva Convention.

Fat cattle sold as high as $134 this week, generally $1 better than last week and $17-$18 above pre-Christmas lows. Furthermore, the choice cut-out surged as to $235.32 on Monday, no less than $44 greater than the worst of December.

While closeouts still take your breath away with per head losses well over $200, the bleeding has been cut in half from the horrific onslaught of the fourth quarter. Additionally, prior to this week's uproar on Wall Street and the global oil patch, the combination of tight fed offerings through the first quarter and rock solid beef processing margins seemed quite promising in terms of an extended cattle market recovery.

But judging by the way most live and feeder futures closed the week down the limit, with spot February live settling $6.50 below cash business on Thursday, traumatized outside markets are seriously challenging the ability of the still-feeble cattle patient to keep improving. Of course, the potential collateral damage caused by slowing global economic growth and sub-$30 oil is much more threatening than a mere delay in the hopeful rehabilitation schedule.

If the bearish rumbling of outside markets seen over the last two weeks proves to be just the vanguard of a much bigger storm, the cattle trade could all too easily slip back into the intensive care unit, a frightening ward (as we experienced through much September, November and December) where conventional meds of supply and demand don't seem to mean much.



To comment, please Log In or Join our Community .

1/16/2016 | 8:57 PM CST
Anyone know why replacement calves have been higher since the first of the year? The feeder price has come down with the board, but for some reason calves have gotten higher with "grass fever bullishness?" It's not like feeder sales have produced anything but red ink! Looks like calculators should have been to grazing interests for Christmas presents! Backgrounders need to pass a portion of these losses back to cow calf producers. Don't know why we need to dig our own holes!