By Cassie Fish, http://cassandrafish.com
The negotiated cash cattle trade continued on Friday, a holiday for the Chicago Mercantile Exchange, and cash prices reached $121 in the north. Cash had not traded over $120 since February 2020, though it twice averaged just under $120- once in early April and once in March last year. To say the rally in cash was a long time coming is an understatement. And packers did not buy many, despite paying up, the total a light 77k head nationally.
Cash market strength proves the front-end fed cattle supplies are much more current and more supply isn’t on deck in the north until May, per usual. The key here being ‘usual’ as the market place is finally normalizing after COVID-19 disruptions and distortions that have lasted an entire year.
At the same time, immediate rabid wholesale beef demand, domestic and export, retailers, and food service, is sending wholesale prices soaring- with no top in sight for now. This morning choice printed at just under $258, the second highest in history for this date.
Last week’s slaughter was lighter than expected at 609k as packers gave workers Saturday off. This week it is back to work and slaughter is estimated between 655k and 665k head.
CME cattle futures responded today with triple digit gains, most active June LC gaining on all other contracts. April LC, is no longer dramatically premium to cash, only $4 over last week’s southern trade. And since this week’s cash prices will advance, it remains to be seen if southern cattle feeders will tender deliveries after today’s close to attempt to bend futures price to their will. If there is a stopper for deliveries, then their plan to reclaim deliveries may fail.
The spread between April and June LC is historically wide, with April LC discount by $3. April LC futures expire April 30 and perhaps with a stopper, the spread can narrow to even money.
All in all cattle futures are technically bullish and shorts have no money made.
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