Cattle Market Commentary 5/16

Cattle & Ranch Report

May 16, 2024

Live Cattle:

Further consolidation continues to keep prices of cattle within a narrow range.  A break out to the upside would lead me to anticipate a test of the down trendline.  If materializes, a move of June to $182.00 would be anticipated.  A dollar or two lower in cash, and basis would be converged. A close of June above $178.57 would lead me to lean more towards the top of the trend line being tested.  Other than this, there is not much else transpiring.  There is little to hedge in the fats, due to the positive basis.  Whether one wants to attempt to help converge basis is up to the individual.  I remain too uneasy of the consumers ability to surge enough in spending to create a strong rally in cattle.  Seemingly, the packer will continue to attempt to reel in negative margins and keeping the slaughter pace low, producing less beef to the market, causing beef prices to remain high, rationing beef to the consumer.

 

Feeder Cattle:

Futures traders are warming up again to offering you premiums for inventory in which has never been traded via the CME feeder cattle index.  I am a little taken back that they would do such again, but by golly, it seems as if they are.  So, get ready to market more inventory.  The end of April high has yet to be exceeded.  I believe that acting on a portion of needs while at this level will be advantageous.  If prices move higher, you can average your price up when marketing more or the remainder of inventory.  If prices start back lower, without having exceeded the top, then at least you will averaging down, instead of just starting at the lower level.  I believe there to be a huge discrepancy between the profitability in feeding the dairy/beef cross over a straight beef breed.  While still on a miniscule scale, in comparison to beef, it is another part of the agenda to keep enough beef available to the consumer without further damaging beef demand.  The longer it moves forward, the margins will shrink.  Until then, the competition seemingly has a good start on margins from the start, while beef breed producers are starting off deep in the red. I think, not to be confused with fact, that a great deal of professional traders have left this market, leaving producers and rank speculators to contend with the computer traded algorithms. In my opinion alone, the algorithmic programs are designed to pull and insert bids and offers in manners that cause a psychological response opposite of what their intentions are. Hence, why we see such volatility and expect a break out, to only watch it fizzle.  So, leaving this to others, I want to use the premiums offered to market your inventory at higher prices than are available today and worry about what I may or may not have missed above the current historical high of feeder cattle.