Sort & Cull

Though the hedonists of ancient Rome were known to party hardy around the festive May Pole, seriously milking the Rites of Spring for all their worth, I don't see how even these legendary merrymakers could have done a better job in celebrating than Thursday's bullish crowd in live and feeder cattle futures.

From CME wall to CME wall, a frantic combination of new buyers and panicky short-coverers laid a sprawling carpet of all-time historical highs.

The sudden contagion of spring fever in the live pit was sparked by the dawning of June as spot contract and its intolerable discount to recent feedlot sales. Frankly, I thought it was a bullish accident just waiting to happen.

While deep deferred discounts were understandable through the much of the first quarter when the cash fed trade was on fire, it seemed odd and overly cautious that June would stubbornly lag so far behind the country trade well into April.

Indeed, it's fairly par for the late spring/early summer course for June to steadily anticipate eroding cash bids through the second quarter. If June would have debuted Thursday morning a mere $3-$4 below likely country sales, few familiar with the historical pattern would have batted an eye.

But bullish eyebrows were justifiably raised prior to the floor trade opening when June seemed prepared to take center stage $7-$9 below spot cash potential. Such incredible basis strength begged for correction and soon got it.

On the other hand, I thought the no-holds-barred buying spree in the feeder pit was even more breathtaking. With the cash index nearly $5 below spot May and almost $12 behind August through November, Thursday's price explosion had nothing to do with catch-up and everything to do with runaway.

Right or wrong, feeder cattle bulls are confidently betting on the perfect storm, a strong market front that combines a bumper corn crop, fully adequate pasture conditions, the continuation of acceptable feedlot profits (or at least the avoidance of ugly losses), and the further contraction of the replacement pool through a meaningful increase in heifer retention.

For more from John www.feelofthemarket.com

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(AG)

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