Blast Off!

By Cassie Fish,

It is seldom in the cattle business that week like occurs. Negotiated fed cattle prices in Texas and Kansas have traded $9/cwt higher than last week at $180, making a new all-time high in the region. The south has been the markets’ weak link and CME live cattle futures have traded discount to cash in the south. North, cattle feeders are passing $187 bid. These prices are all-time highs.

As packers have been forced to compete for continued tight market-ready fed cattle supplies, prices have escalated. Beef demand is solid, sales last week were brisk and the only way to supply demand is by covering slaughter schedules. The packer has held leverage for years. Not anymore.

CME live cattle futures posted an enormous rally today, June LC leading with a 577 point gain, which filled a gap on the weekly continuation chart. At $174.90, June is still a $5 discount to cash. All in all, this is a remarkable, dynamic bull market.

Boxed beef values are increasing too, though not as quickly as the cattle and futures values. This morning the choice cutout was up $1.23/cwt at $307.07.

Today’s developments may surprise some but the numbers don’t lie. Any year when supply drops sharply, especially one coming off two record years of production, will see a big price jump. Eventually, the pendulum does swing the other direction. Cattle feeders have endured 4 years of challenges, foremost the struggle to get fed cattle harvested in a timely manner. The outlook for the next 18 to 24 months is one of tight fed cattle supplies, and high cattle prices but to the cattle producer, its been a very long time coming.

Could this be a short-term top building in the market this month? Possibly. But long term, there is much more bull market to come.

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