Sort and Cull

It may only be the third week of April, but following last week's developments everyone seems to be wondering the same thing: Is the spring high in for the fed cash cattle market?

To recap for those who were busy last week: the futures market traded higher last week until Thursday and Friday, when the market dumped its bullish attitude and sent the contracts tumbling lower. Throughout the week, April live cattle fell $1.82, June live cattle fell $1.85, April feeder cattle fell $2.82 and May feeder cattle fell $7.07.

There was hope the fed cash cattle market would be able to trade steady, if not a tick higher, as just the week before packers weren't able to secure much supply in the cash sector -- less than 40,000 head to be exact. Unfortunately, prices tipped the scale in the opposite direction. Throughout the week, Southern live cattle traded at mostly $248, which is steady with the previous week's weighted average; Northern dressed cattle traded at mostly $388, which is steady to $1 lower than the previous week's weighted average.

So, all in all, the market's developments weren't just plain awful; but nor were they advantageous during a point in time when one would suspect the market would be itching to rally. Typically, this is when boxed beef prices seasonally peak as consumer demand is red-hot leading up to the long Memorial Day weekend in May.

However, adding yet another mixed signal to the marketplace, boxed beef prices also trended lower throughout last week: choice cuts averaged $381.95 (down $0.54 from the previous week) and select cuts averaged $379.42 (down $4.56 from the previous week).

If you look at all the market factors together -- steady to lower trade in the cash sector; weakness/exhaustion in the futures complex; and slightly weaker buying interest from consumers -- it doesn't paint a warm and fuzzy picture for the marketplace headed into this week. At the same time, if it were May 15 as opposed to April 20, I'd be almost willing to bet the market had successfully reached the high-water mark for the season.

But, since there is still plenty of time between now and the end of May, there's a chance external support could arise -- if the equity markets rally; if tension eases in the Middle East; and fuel prices drop lower. Traders could regain stamina and opt to take another run with the contracts and feedlot managers could scrape another couple of dollars higher in the cash sector.

It's too early to say whether the top is in for the season. However, it will be imperative for the market's success that support comes from both fundamental and technical factors as lukewarm support won't be enough to rekindle the market's fire.

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

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