Holding the Line

By Cassie Fish, http://cassandrafish.com

Packers are doing their best to hold fed cash cattle prices in check. The scorching rally in boxed beef prices which have blown their margins out over $300 per head is coming to an end. Packers really aren’t bidding in the north, just indicating they will ‘call’ a price steady with last week.

The tiny on-line fed cattle auction saw $113.75 top the market in the south, 0.75 higher than last week and almost comical when you consider how big margins are for packers. Way back in the day, cattle traded by quarters all the time but it has been two decades at least since that was common.

Packers may need to add to their inventory this week but they have had their way consistently ever since the Tyson Finney County fire occurred in August 2019. They have a psychological advantage over the cattle feeder who has struggled mightily for a year and a half.

Packers are aware if they run the clock down to the end of the week, a seller may cave in and hit the packers’ bid and then the rest of the trade will follow. Because of the large Q3 placements against Q1 there are ample fed cattle supplies to be sure, but the fast slaughter pace of 2021 is moving through numbers quicker than the most bearish analyst had forecast. And the fundamental outlook for Q2 and beyond is decidedly friendly.

Winter weather in the north has slowed cattle down and next week it will have additional impact with highs in the low teens and single digits and lows sub-zero covering Nebraska, Iowa, the Dakotas, and Minnesota. There will be bouts of snow and wind at times. Grading will begin to slide in the north if it hasn’t already.

Two southern plants will take on maintenance projects over the next 11 days, one a well-advertised shut down of 10 days, the other just a couple of days. Packers are hoping that reality along with the cutout topping will tip the scales their way again this week and cash will trade steady at $113 or no worse than $1 higher at $114.

CME cattle futures are very quiet, Feb and Apr LC losing to the deferred contracts in choppy, almost directionless, and light volume trade. Feb and Apr LC are both lower on the week while the back end is higher. Each contract took out last week’s lows on Monday and has traded above that low since.

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