Sort & Cull

Last week's market was a fiery one for both the live cattle and feeder cattle complex as fundamental demand helped rally traders and the gains were not only seen in the countryside, but also throughout the futures complex.

To recap some of last week's success, Northern dressed cattle ended up trading for mostly $312 and Southern live cattle traded for mostly $190 -- both of which were $2 higher than the previous week's weighted average. From July 19 to July 26, the August live cattle contract gained $5.48, the October live cattle contract gained $5.08, the August feeder cattle contract jumped $4.10 and the September feeder cattle contract jumped $3.83. And to prove just how strong feeder cattle demand is in the countryside, the CME feeder cattle index closed July 26 at $258.75.

The market continues to defy seasonal norms. It's somewhat bewildering that the cash cattle market was able to rally $2 last week as the market is sitting smack dab in the middle of the dog days of summer and as packers have cut throughput dramatically. Which then logically makes one wonder if the USDA's Cattle on Feed reports are accurate. If the market currently has 11,304,000 head of cattle on feed -- which is 1% more than what the market had on feed a year ago -- then why are packers having to pay more money for cash cattle right now? It is at a time when supplies should theoretically be readily available to them and give them the opportunity to press cash prices lower, ahead of when demand perks back up in the fall.

But without rhyme or reason, feedlot managers continue to possess the lion's share of the market and that's not likely to change any time soon.

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

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