Over the last month, the live cattle market has endured pressure from outside influences mainly stemming from our weakened economy, inflation hikes and the promise of higher interest rates. While the futures complex has been spending its time trading lower, the fundamental windshield of the cattle market hasn't changed. Now, with Monday's stronger close, cattlemen and traders alike are wondering if the market is ready to trade higher.
There are a couple of key fundamental factors that have been strongly supporting the live cattle market behind the scenes of the futures market's volatile nature. First, slaughter speeds have been and continue to be extremely aggressive. As of last Friday, thus far in 2022, the U.S. has processed 26,691,000 head of cattle, up 1.6% compared to a year ago. That equates to 22,014 million pounds of beef, up 1.4% compared to a year ago. Second, even though boxed beef prices have been slow to recover in October, as they historically have, the sheer volume of sales packers have made is helping offset the lower prices as they're moving more product.
Whether or not packers would cut processing speeds to help protect their margins has been a lingering concern for the market, but as long as retailers continue to buy large volumes of product, packers may stomach the lower prices and continue to carefully manage their bottom line. Lastly, the cash cattle market has performed exceptionally well over the last month. Feedlots have waited patiently for their time to shine and with front-end supplies of market-ready cattle thin and packers in need of cattle because of vigorous chain speeds, cash cattle prices have crept higher. The market will likely continue this trend well into 2023 as cattle are being pulled ahead of schedule.
The outside pressures looming around the market still exist. Inflation has shown no signs of weakening; interest rates are promised to become higher in the months ahead; and there's still the concern that, with the U.S. dollar at the level it's at, export demand could wane. The war between what's developing and transpiring within the cattle market -- and what's developing and transpiring throughout our economy -- will rage on for some time. Nevertheless, the market will continue to be a balancing act, weighing the two components -- the cattle market and the U.S. economy -- against one another.
ShayLe Stewart can be reached at ShayLe.Stewart@dtn.com
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