Sort & Cull

Try as it might and hope as we may, the live cattle complex was clear last Friday. Although there may be bullish fundamentals still supporting the cattle complex -- the market still has challenges laying at its feet.

To recap, last week the live cattle complex traded mostly steady, unable to gain substantial traction in the futures as boxed beef prices traded sideways. The cash cattle market waited to trade until Thursday and, unfortunately, prices were marked $2.00 lower than the previous week's weighted average. But on Friday, traders didn't bat an eye about sending the contracts $3.00 lower as the market's fundamental support simply didn't come to fruition as hoped. And consequently, the market's tumultuous close on Friday afternoon took out the current support plane at $194.

Now, as traders, cattlemen and everyone in between head into this week's market, we expect pressure to again be the theme early in the week. Unfortunately, it could remain the market's tone until seasonal boxed beef demand perks up. At that point, packers could potentially push to increase chain speeds if consumers are showing strong support. However, given that packer margins remain pressured currently, they will need to see strong beef demand surface before they dip more aggressively in the cash market.

Last week, Southern live cattle traded at $197, which is $2.00 lower than the previous week's weighted average. Northern dressed cattle traded at $313, which is also $2.00 lower than the previous week's weighted average. Last week's negotiated cash cattle trade totaled 55,893 head. Of that, 97% (54,475 head) were committed to the market's nearby delivery, while the remaining 3% (1,418 head) were committed to the deferred delivery option.

Even though packers are expected to continue to pressure the cash cattle market, with them only buying 55,000 head in the cash market for the last two weeks, they're not overly committed with supply. Once demand does turn and they do increase chain speeds, their tone toward the cash market may need to change rapidly to ensure there's enough product to market to retailers.

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

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