Sort & Cull

By Friday's end, last week's market felt like a whirlwind. Early in the week, the market seemed nearly unstoppable as the contracts kept climbing higher. Boxed beef prices were seeing an unseasonal rally, but then Friday arrived -- contracts plummeted (as traders partook in some profit taking) and cash prices traded mostly steady in the South to $4 lower in the North.

Like I said, it was a whirlwind of difference between the first four trading days of the week, compared to the last day.

And, having now watched the market trade through Monday's hours, it's clear that traders remain on edge, uncertain about what to do with the cattle complex moving forward.

On one hand, you can soundly say that there's enough fundamental support in the market that traders should be able to regather themselves and recoup Friday's loss within the next week or two. But on the other hand, it's fair to ask how much higher can this market actually go, especially historically this would normally be when the cattle complex trades lower.

And while I wish I had the exact answer for you on which way the market was going to trade in the upcoming days, our answer will unfortunately have to come with time.

But there are few things that I think will influence traders greatly in the upcoming days. First continues to be beef demand. It's incredible that during last week, and the start of this week, boxed beef prices have closed higher. The question remains unanswered of how much higher can beef prices get before consumers have to choose a different protein option.

At this point, Americans continue to buy the beef they've grown to love and trust. So, if demand remains steady, that should continue to lend traders support; but, if it weakens, they'll likely feel unsettled by that change.

Second is the matter of throughput. Last week's slaughter of 536,000 head was 1,000 head more than the previous week, but 51,000 head fewer than the same week a year ago. There have been rumors circulating that some packers are going to cut another shift to try to limit their needs on the cash market, which would likely unsettle traders as well, but that's yet to happen. Packers have to carefully manage both sides of the coin, as they obviously don't want to pay more money for cattle in the cash market, but they also can't afford to forget to have enough beef to sell to retailers when prices are inching higher.

Last, but not least, traders will continue to watch closely how feedlot managers handle the cash market. During the last year, feedlot managers have been dedicated fighters for the advancement of the cash market, and that has time and time again given traders more confidence in the marketplace when otherwise they probably would have let prices trade steady or drift lower.

I share this with you to inform you that the market is sitting on somewhat of a teeter-totter. There's a case to be made that traders could rebound from Friday's fallen position. However, there's equally a case to be made that the market could transition into a lower trending playing field for the next little while. In the long term, I believe the market remains bullish: supplies are limited, but traders could be looking for a technical "breather."

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

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