Call the Market

With fires in the West, hurricanes in the East and economic and political uncertainty everywhere in between, it's been easy to overlook the recent advancement of the cattle complex, as life is heavy for many Americans right now.

I heard the grumblings of many producers when the commodity and equity markets plummeted early in August. They wished they would have capitalized on the market's strength when the opportunity existed. That's why I want to spend some time today highlighting the market's current strength and where prices sit.

FUTURES COMPLEX

Over the past few weeks, both the live and feeder cattle markets have rallied aggressively, as traders have acknowledged the strength of the fundamentals and have been committed to advancing the complex almost daily. Since the live cattle market bottomed on Aug. 21, the December live cattle contract has gained $13.60 in a little over a month's time. The spot November feeder cattle contract bottomed on Sept. 6 and since then has added $22.28. The recent gains throughout the futures complex have both the live cattle and feeder cattle markets taking on resistance points. The live cattle complex is trading at its highest point since the equity meltdown in early August, and on Tuesday afternoon, the spot November feeder cattle contract closed above its 100-day moving average, which the market hasn't traded above since early July. There is a chance the futures rally eases, as the complex is technically overbought. But with the market's strong fundamentals continuing to lend ample support, traders could just as likely continue to push the market while support remains.

FED CASH CATTLE MARKET

Traders have relied heavily on the fed cash cattle market's strength to justify their advancements in the futures. Thankfully, feedlot managers have been able to consistently work the market higher week in and week out. Over the last month, Southern live cattle prices have gained $5, as just last week, prices averaged $186 in the South. Also, over the last month, Northern dressed cattle sales have gained $8, as just the first week of October, dressed prices averaged $296.

Feedlot managers are in a unique position right now. Although there are record numbers of cattle on feed, they've learned in recent years that the shelf life of market-ready cattle is greater than originally assumed. And with feed prices cheap, the ability and incentive to feed cattle longer has changed dramatically compared to industry standards before COVID. In the first week of October, steer carcass weights averaged 948 pounds, which is 30 pounds more than what carcass weights were averaging just a year ago. I'm gravely concerned that the industry's trend of feeding and breeding cattle to be bigger will be a costly lesson to learn when the cow herd begins to rebuild and domestic feeder cattle supplies grow. But for the time being, that doesn't seem to be the case. Thankfully, feedlot managers have regained substantial market leverage over the last month, and their strategic marketing tactics have helped traders remain confident and engaged in the marketplace.

FEEDER CATTLE MARKET

The cash feeder cattle market has been thrilling to watch over the past two to three weeks, as buyers have been active and eagerly participating in sales. Depending on what the market does in the fourth quarter, the feeder cattle market's high may have been reached in early July when the CME Feeder Cattle Index topped out at $261.04. But on Tuesday, Oct. 8, the CME Feeder Cattle Index closed at $248.75, which is no price to scoff at. It's been especially interesting to watch lightweight calves (less than 500 pounds) trade as buyers need calves for their wheat pastures, and seeing weekly prices jump anywhere from $5 to $20 higher has been the market's recent norm.

CONCLUSION

Life is chaotic right now, and it's easy to lose market perspective while you're juggling and managing all the different hats you wear. But if you're someone who hasn't yet sold your calves, I'd encourage you to take a long, hard look at the market, as it's changed dramatically over the past month.

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

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