Weekly Round-up
>>Cash Average last week finished up the south near $120 Live and $125 in the north
>> Choice Boxed Beef ended last week at $296.26 and Select at $277.09
>> Weights seasonally on the rise, while still above the 5-year average by nearly 20 pounds
>> Hot dry weather pulling yearlings and pairs from grass early
>> Extremely elevated hay markets, while corn slipping slightly= CoG still above $1.00/lb
>> October Futures repeatedly finding resistance at $130
Source: QST
THE HIDDEN BALL TRICK!
Last week, to the naked eye, seemed very positive in the cattle complex. Friday started out brutal in the futures market, before making an impressive recovery and finishing in the green. Boxed beef rallied nearly all week, pushing us up closer to that $300 that gets everyones attention. Even cash cattle could be seen as a full $2 stronger than the previous week. Anyone seen the baseball?
How far out are the packers buying cash cattle for? Are these quick ship cattle? The cattle that sold last week, how finished are they? I ask these questions after coming off the road for the entire last week. There are plenty of market ready animals out there. Feedlots big and small are wanting to ship before too many extra days on feed are added. So why is cash stronger? The old packer play book comes to mind, and I feel like this is a page right out of it. That page says buy as many cattle as they can, even at higher money. Some of these cattle will get killed this month, some next month.
Simple reason- keep weights elevated to keep beef production high, even with our current slaughter numbers. The beneficial side effect is, they dont have to be aggressive in the cash market for the next several weeks. What is coming end of next week? Cattle on Feed report. They can get the majority of the cash negotiatedcattle they will need for the month purchased in one week, leave them on feed, to keep weights elevated, and avoid a potential rallying market after a possible bullish report, all while forcing the cash in the following weeks to level off or go lower, likely keeping their formulas base price cheaper. Like I said, right out of the playbook. The question is, what can we do about it?
Cash Cattle have seemed to hover around that $120 average for the last several months. Meanwhile, October futures have tried several times to punch through that big $130 number. Sitting here, looking at the supply of market-ready fats for the next 60 days, Im a hard seller of October just under $130. Most of the cattle on feed right now are profitable at that level. Its the bottom of the 9th, were down by one run and the bases are loaded. You can bet the farm Im going for the base hit instead of the home run! December-April futures, Ill buy some insurance and hope for the right pitch to hit out of the park, but not Q3 cattle.
Stay cool, keep those drinkers clean, and look at 7 weight steers, they have some value at the moment.
Looking to Trade or Hedge Cattle Please reach out and let’s chat…
Dan Gerhold
319.320.4774
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