Sort & Cull

If there was ever a fruitful Monday, today would be in the running for one of the best. Following all last week's dynamic, prosperous trade -- where fed cash cattle prices reached all-time highs, both the live cattle and feeder cattle contracts traded higher, and feeder cattle demand remained strong in the countryside -- the market opened Monday morning with both the live cattle and feeder cattle contracts gapping sharply higher.

Traders elected to send the contracts higher as news broke on May 11 from Ag Secretary Brooke Rollins that all Mexican cattle imports would be banned again for 15 days as the spread of New World screwworm continues to migrate closer to the United States' southern border. DTN Senior Livestock Editor Jennifer Carrico covered the breaking news here: https://www.dtnpf.com/….

Then, late Sunday evening, President Donald Trump announced there would be a 90-day tariff rollback on China as Trump and China's President Xi Jinping are working toward a long-term trade agreement -- which obviously had a powerful impact on the equity markets and on all the livestock contracts. DTN's Ag Policy Editor Chris Clayton covered the news, including how the markets were starting to react, here: https://www.dtnpf.com/….

This means the cattle complex is currently being supported by numerous headlines. This is both a blessing and a curse. For days like May 12, it's exciting to see the contracts wildly supported by traders and to see the market trade sharply higher. But we can't forget that whenever a rollercoaster ride climbs uphill, there's always a slide down soon to follow.

It will be especially interesting to see what happens with this week's fed cash cattle market. Packers are battling red ink and are beyond aggravated that the normal seasonal May/June boxed beef rally hasn't seemed to take shape just yet. But even after dramatically slashing processing speeds, packers haven't been able to gain a foothold on the fed cash cattle market as prices continue to trade higher.

But the pendulum may be starting to swing, as during the last two weeks packers have been able to buy some inventory for the deferred delivery option. This eases the need for them to chase the spot cash market as aggressively in weeks to come.

Last week, Southern live cattle traded at mostly $219 to $220, which is $1 to $2 higher than the prior week's weighted average. Northern dressed cattle traded at mostly $355, which is $6 higher than the previous week's weighted average.

Last week's negotiated cash cattle trade totaled 83,514 head. Of that, 64% (53,519 head) were committed to the market's nearby delivery option, while the remaining 36% (29,995 head) were committed to the deferred delivery option.

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

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