Call the Market

Amid record drought conditions in the West, a year that's beckoned corn prices to reach thresholds not last seen since 2013 and a market that's seeing unsettling inflation throughout all inputs, it's easy to overlook the victories that the market has seen in the last month as cattlemen have gotten used to a depressed marketplace.

With how strong the cattle market has rallied into the fourth quarter, cattlemen have much to be thankful for this Thanksgiving. Whether you analyze the feeder cattle market or the live cattle complex, the past month has been nothing short of an inspiring underdog story where the home team that's expected to lose ends up winning the game late in the fourth quarter through their unwavering passion and unyielding commitment.

And that's this year's cattle market, my friends!

Let's discuss all the triumphs that the live cattle market has recently conquered. We could easily begin discussing the monumental wins that the cash cattle market has achieved in the last month, and we could banter back and forth about the excellent beef demand that the market has hungered for -- or, we could talk about how aggressive packers have been in moving product. However, above all else, I truly believe that the cattle market's biggest feat has been the renewed ability to demand higher prices and revitalize price discovery within the fat cattle sector, because, honestly, what's the point of having a product if you can't market it.

What is price discovery, you ask? By definition, the CME states "price discovery refers to the act of determining a common price for an asset. It occurs every time a seller and buyer interact in a regulated exchange." The problem with the cash cattle market during the last two years has been the fact that feedlots were never given the ability to negotiate the price of their cattle. Packers would call and offer a bid, and feedlots had a matter of seconds do decide whether or not they were going to take their bid or turn it down and run the risk of not getting another bid for weeks.

Thankfully, the recent shift in the cash cattle market's dynamics has changed that behavior.

During the last month, here are the volumes and price jumps that the cash market has demanded, for the week ending Oct. 29, there were 103,877 head of cattle traded in the cash cattle market, and prices jumped $2 to $4 higher. In the next week, ending Nov. 5, there were 96,867 head of cattle that traded through the negotiated cash market, and prices jumped $2 to $5 higher. In the next week, ending Nov. 12, there were 118,797 head of cattle that traded through the cash market, and prices climbed $3 to $4 higher.

For the week ending Nov. 19, there were 116,750 head of cattle traded through the cash market, and cash prices jumped $1 to $3 higher. With this week's cash cattle business not done with yet (week ending Nov. 26), we obviously don't know the total number of cattle that will be traded. However, we do know that prices have jumped another $5 to $7 higher.

Do you see how true price discovery makes a market flourish? In the above paragraph, where prices rallied (pushed by feedlots) and where the market's volumes of cash cattle sold was significant (sought out from packers), the market possessed all the necessary components to achieve true price discovery within the sector.

A healthy, robust market serves all parties involved. Cow-calf producers are seeing heightened demand for their calves as feedlots are excited about the upcoming year. Feedlots are finally seeing worthwhile fat cattle prices and are anxious to refill their pens, as packers have been extremely aggressive and the upcoming year looks promising. Even though the boxed beef market has dipped slightly lower, prices are still lavish with choice cuts $37.04 higher than a year ago and select cuts $48.19 higher than a year ago.

When you gather around your table this week for Thanksgiving, I hope that you share the exciting nature that the cattle market has recently regained. Next year (2022) is beaming with optimism and there is a lot to be thankful for this year despite the hardships that have recently been endured.

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In planning for the holiday season and what may come with the new year, make plans to attend the 2021 DTN Ag Summit, Dec. 5-7, in Chicago. Visit http://www.dtn.com/… for more details about the summit and to register. Register before Nov. 26 for the early bird rate.

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

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