Sort & Cull

As summer presents its beauty of luscious green pastures and healthy calves, we all know that the cash cattle market tends to weaken throughout the hot days of the season. As the industry continues to deal with the consequences of COVID-19, the one outlying, oddball reality has been cash cattle prices through this pandemic. It is strange that as packers have an abundance of cattle to choose from, that they have elevated the cash cattle market and bought more cattle than they historically have.

Last week's cash cattle trade was enormous as packers bought 119,726 head. A large majority of those cattle were for delivery in the first two weeks (112,475 head), while the rest (7,251 head) will be delivered in the next 15 to 30 days. You won't hear cattlemen complain about higher cash cattle prices, but one thing that you will hear them groan about is weaker feeder cattle prices -- which could be in our near future if cash cattle prices take a nosedive.

As boxed beef prices head lower from their recent high, packers are losing some of their margin. And if packers are starting to lose some money, many are worried that cash cattle prices will weaken. On June 1, June live cattle closed at $98.30, August live cattle at $98.97 and October live cattle at $101.37. Fundamentally, the cash cattle prices recently seen are higher than market support. But moving forward, producers know that prices will weaken throughout the summer, the questions they have is how much will fat cattle prices weaken? How will the regression affect upcoming feeder cattle prices? And when will prices start to head lower?

Knowing that the market has traded every which way but logically through COVID-19, pinpointing those answers is tough as day-to-day circumstances can change in a matter of minutes. But as producers start keeping tabs on feeder cattle sales and what prices are ringing the market bell, it may also be worth keeping track of cash cattle prices and slaughter trends.

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

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