Call the Market

Cattle Market Caught Saving the Day but Selling Out Tomorrow

ShayLe Stewart
By  ShayLe Stewart , DTN Livestock Analyst
Strong boxed beef prices show that consumers desperately want beef products, even if price levels are high. (DTN photo by ShayLe Stewart)

Since the beginning of the new year, inflation has been something that we've all become more distinctly aware of, whether we've seen the spike in fuel prices, groceries or through other commodities -- it's affected us all to some degree or another. According to the USDA's Changes in the Consumer Food Price Index, compared to year-ago prices (comparing March 2020 to March 2021), all food has seen an increase of 1.6% year over year, food away from home has increased by 2.3%, and beef and veal prices have increased by 7.1%, while pork prices have increased by 5.3%.

Higher prices are being seen throughout the nation for various goods, but looking at the cattle market more specifically -- if corn prices are higher, if slaughter is chipping away at supplies aggressively and there isn't a backlog of market-ready cattle to work through, and if boxed beef prices are higher, then why aren't live cattle prices higher as well?

Addressing that problem specifically, today's cash cattle market is being cut short by two undeniable problems -- there's still a problem in our nation's food supply chain, and by allowing packers to buy cattle with time.

To be frank, and to call a "ball a ball and a strike a strike," beef consumers in the U.S. aren't getting enough of the product they desire. On Tuesday afternoon (April 27), both choice and select cuts closed more than $5.00 higher. Americans want beef and feedlots have cattle to sell, yet here we sit with live cattle prices still dancing around $120.00.

Part of the reason why live cattle prices are depressed is because packers are able to secure their needs by buying cattle with time.

There are two reasons why packers buy cattle with time: 1) they know that supplies are going to become limited, or 2) because they foresee prices rallying. Both reasons lead to lower cash cattle prices in the future, as packers are able to mitigate their dependance on the cash cattle market for supplies through their forward purchases.

Here is a look at the number of cattle that have been bought through the negotiated cash cattle market since the beginning of the year. You'll notice that in the last two weeks, of the cattle that packers have bought, nearly 50% of their purchases have been secured for the deferred delivery. We've known since last fall that, with the oddity in placements last year, the second half of 2021 was going to have fewer market-ready fed cattle supplies than what the market has historically grown accustomed to. Knowing that information, packers have also been safeguarding their margins by slowly building up their forward bought cattle supplies.

Date # Bought Nearby Delivery % of Total Deferred Delivery % of Total
1/4/2021 81,517 58,709 72% 22,808 28%
1/11/2021 80,439 53,524 67% 26,915 33%
1/18/2021 95,868 60,191 63% 35,677 37%
1/25/2021 88,895 64,836 73% 24,059 27%
2/1/2021 92,524 80,103 87% 12,421 13%
2/8/2021 102,508 74,417 73% 28,091 27%
2/15/2021 74,422 52,006 70% 22,416 30%
2/22/2021 74,306 50,447 68% 23,859 32%
3/1/2021 84,242 77,087 92% 7,155 8%
3/8/2021 79,593 54,894 69% 24,699 31%
3/15/2021 92,625 71,192 77% 21,433 23%
3/22/2021 80,719 60,980 76% 19,739 24%
3/29/2021 99,682 64,241 64% 35,441 36%
4/5/2021 77,169 41,213 53% 35,956 47%
4/11/2021 108,513 75,474 70% 33,039 30%
4/19/2021 88,624 48,568 55% 40,056 45%
4/25/2021 67,738 35,291 52% 32,447 48%

The recent rally in corn prices has certainly had its effect on the cattle market. With corn prices dancing between $6.50 to $7.00 per bushel, feedlots are having to rework their marketing strategies as their daily cost of gains are rapidly increasing and they can't afford to feed cattle out to 1,400 pounds.

But just like corn is bought and sold as a commodity, cattle are a commodity, too. Moving forward, feedlots are going to be pressured to dump cattle due to the corn market's onset of higher prices -- but understanding that selling cheap cattle today only undermines the market tomorrow is just as great of a necessity.

Here is the link to USDA's Food Price Outlook & Consumer Price Index:…

ShayLe Stewart can be reached at

ShayLe Stewart