Sort & Cull

After spending much of the first quarter imitating a convention of retired librarians, cattle market bulls have suddenly jumped the velvet rope at the CME and stormed its stage like thirsty frat boys on spring break.

For example, feeder futures have rocketed to new contract highs in four consecutive sessions this week. Since bottoming on April 5, spot April explode by no less than 1,072 points before the bullish froth attracted some profit taking.

So why did board traders abruptly transform from wallflowers to party animals? For reasons both mundane and extraordinary.

Start with a simple glance at the calendar, the greening grass, and the family grill peeking from the garage. 'Tis the season to be bullish. Indeed, if you would poll cattle veterans to identify the traditional sweet spot of the marketing year, that magic hour when the best combination of tight fed supplies and strong beef demand surfaces, nine out of ten would no doubt name the heart of April.

You can file the next reason to turn the lights down brown under "nothing succeeds like success." Cattle feeding profits through the first three months of 2017 were worthy of King Midas on a "touchy-feely" day. According to the DTN feeding model, the average fed steer scored a net profit of $253.86.

While feeding companies came into the year with almost a desperate need to rebuild equity, there is always something about feeding profits that begs to be "reinvested." Indeed, not even Samsung could do a better job burning a hole in the feedlot pocket.

In addition, the longer fed prices and profits were sustained, the more likely it became for feeder cattle spending (if first in paper, then in cash) to turn very aggressive. Furthermore, such pent-up bullishness was dangerously vulnerable to an unexpected spark; some sexy, maverick potential that suddenly inflates psychology like the Goodyear Blimp.

Something like, oh, I don't know ... the reopening of China to U.S. beef exports.

Which brings us to this week's final reason to party-hearty in the cattle complex. Although Presidents Trump and Xi parted last weekend without any formal agreements signed, both sides seemed to get along.

In fact, our man found enough "chemistry" to at least temporarily lose much of his famous China-bashing rhetoric.

Though it wasn't very specific and rife with awkward questions, the resulting 100-day plan (a plan to plan?) was tantalizing enough to stock the bar for eager party-goers in the cattle market just looking for another excuse to let their hair down.

For more from John see www.feelofthemarket.com

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(CZ)

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