As if we needed another reason to eagerly wait for 2021's ball drop, the cash cattle market continues to grow in strength and power heading into the New Year.
As we've often talked about it, the holidays can be a tricky time for feedlots to manage the marketing of their fat cattle as packers are especially difficult to work with during the holidays. The shortened holiday weeks put feedlots on edge because they worry about the number of cattle that will be slaughtered and question just how many cattle packers truly need to buy. But even though packers tried telling feedlots, for more than a month, that they weren't going to be aggressive during the Christmas holiday, last week's weighted averages spoke differently.
Even with Christmas Eve falling on Thursday of last week, the true test of last week's cash cattle market didn't develop until midday Wednesday and there was even some clean-up trade trickle into Thursday. The Northern Plains sold dressed cattle for $168 to $172, which is $4 to $5 higher than a week ago, and the Southern Plains sold live cattle anywhere from $109 to $110, which is $1 to $2 stronger.
Heading into this upcoming week, it's very likely that feedlots are able to easily add another $1 to $2 on top of last week's gains. Even though last week's market was strong, packers haven't bought very many cattle during the last three weeks (less than 85,000 head last week and less than 60,000 head the two weeks before that). While heading into the New Year, the industry should continue to see high slaughter speeds, which will require more cattle.
But potentially the biggest takeaway from last week's strong market should be the importance of knowing the marketplace and being willing to push for higher prices. When feedlots get ready to price their cattle week after week, it's pretty safe to assume that feedlots aren't going to ask for anything more than $1 to $2 higher, regardless of how strong the market's fundamentals may be. The problem with only pushing the market $1 to $2 higher when the opportunity allows is that it's, to some degree, a waste of an opportunity. When the market's ripe for the picking, feedlots may need to consider asking $4 to $5 more as packers will always counteroffer, but it's hard to ask for more money once your initial asking prices are stated for the week.
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ShayLe Stewart can be reached at ShayLe.Stewart@dtn.com
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