Sort and Cull

If there's one thing we can all agree upon, it's that the fed cash cattle market has been the biggest driver in this stage of the market's bull run. Yes, beef demand has been strong and, hopefully, over the course of the next two months demand will remain red-hot and keep with its seasonal norm, rallying through May and into the early weeks of June. But above anything else, the fed cash cattle market gets the credit for last week's monumental success.

Last week, Northern dressed cattle traded anywhere from $392 to $405, but mostly at $400, which is $14 higher than the previous week's weighted average. Southern live cattle traded anywhere from $250 to $256, but mostly at $255 to $256, which is $9 to $10 higher than the previous week's weighted average. The weighted averages for both regions mark new all-time highs in the fed cash cattle market as packers were extremely aggressive in last week's market. To be exact, last week's negotiated fed cash cattle trade totaled 91,765 head, of which, 80% (73,104 head) were committed to the market's nearby delivery), but the remaining 20% (18,661 head) were committed to the market's deferred delivery option.

Now that packers have cattle stacked around them, logically the next question becomes: What happens now? After rallying in the beginning days of last week's trade, the market began to move lower starting on Thursday in the live cattle complex. That lower trend continued through Monday's close. More than anything, traders seem to be sitting on edge, waiting to see what happens in terms of packer demand this week. But given the aggressive volume packers bought last week, there's a chance the market trends steady to somewhat lower; unless packers show their hand and are even shorter bought than we assumed. As always, time will tell, but following a massive upward roar like we saw last week, a more cautious, calculated week likely lays ahead of us.

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

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