Sort and Cull

Last week's market was utterly incredible. From the technical support from traders, to the multilateral support of the cattle market's fundamentals from higher cash cattle sales, to increased consumer demand, to the continued interest of feeder cattle buyers, last week's market was truly powerful.

But as traders and cattlemen alike prepare for this upcoming week, they're all wondering the same thing: Is the market ready to leap into a spring rally, and does it possess the power necessary to do so?

From both a historical and seasonal perspective, the market indicates that it's inching toward a spring rally. Just last week, Southern live cattle traded at $202 to $203, which is $5 to $6 higher than the previous week, and Northern dressed cattle sales were marked at mostly $325, which is $9 higher than the previous week's weighted average. Last week's negotiated cash cattle trade totaled 81,521 head. Of that, 91% (73,981 head) were committed to the nearby delivery), while the remaining 9% (7,540 head) were committed to the deferred delivery.

And from a consumer demand perspective, grilling season is right around the corner, and boxed beef prices are starting to creep higher already. Last week, choice cuts averaged $319.57 (up $5.50 from the previous week's weighted average), and select cuts averaged $307.03 (up $3.37 from the previous week's weighted average). Even though packers have battled red margins in recent months and have cut processing speeds to hopefully lessen their need of the cash market and drive boxed beef prices higher -- last week, chain speeds improved, showing that packers want to be able to market more beef as prices rise. Last week's total slaughter was estimated at 587,000 head, which is 9,000 head more than the previous week but still 10,000 head fewer than a year ago.

But as with most weeks, the market won't be without challenges this week as, on Friday, the monthly Cattle on Feed report is set to be released. The psychological turmoil that the market endures waiting to see how actual USDA figures differ from those of the pre-report estimates weighs heavily on the market. And I would be remiss to neglect to mention that the spot June contract is close to reaching the resistance plane established in January at $201.

But even with some challenges lying ahead of it, the cattle complex seems primed for a seasonal spring rally, and thus far, the market has been met with plenty of support to continue to trade higher.

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

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