Sort & Cull
The 2 Things to Watch on Spring's Cash Cattle High Prices
The cash cattle market's wild gains have been one of the biggest reasons why traders have felt confident in driving the live cattle and feeder cattle contracts higher. With front-end supplies of market-ready cattle incredibly thin, the cash cattle market should continue to demand higher prices, but there are two major components that, at some point in time, will upend the cash cattle market's upward run.
One way packers could "pump the brakes" on the cash cattle market is to cut slaughter speeds. By cutting slaughter speeds, they reduce the number of cattle they need on a weekly basis and consequently back up showlists. This favors their position when beef demand is marginal, as it suppresses cash cattle prices and limits an overabundance of beef being available to retails, which then helps drive beef prices higher through greater competition. Even though packers aren't electing to run processing speeds as aggressively as they were at this time last year, they're still running relatively aggressive chain speeds. So long as the weekly kill can remain above 600,000 head on a weekly basis, showlists should be able to remain current.
The other factor that could hinder the cash cattle market's ability to continue to rally is beef demand. Even though Americans are feeling the pinch of inflation and are experiencing the costly side effects of a weakened economy, they're still buying beef. Throughout last week, choice cuts averaged $297.91 (up $9.45 from the previous week) and select cuts averaged $281.90 (up $5.36 from the prior week). This point also affects slaughter speeds. Packers haven't chosen to reduce slaughter speeds more drastically than what they currently have as beef demand is too lucrative right now for them to miss out on beef sales. Beef demand should remain strong through the middle to end of May, which also bodes well for feedlots who want to push the cash cattle market even higher.
I'd be skeptical if anyone tries saying they know when the cash cattle market will make its spring high. However, the two factors mentioned above are what I'm watching for as signs to when a spring top could be in close range.
ShayLe Stewart can be reached at ShayLe.Stewart@dtn.com
(c) Copyright 2023 DTN, LLC. All rights reserved.
To comment, please Log In or Join our Community .