Cattle & Ranch Report

May 22, 2024

Live Cattle:

No breaks this morning starting off for the cattle feeder.  Futures traders continue make it tough on cattle feeders.  The positive basis in fats, and negative in feeders, is backwards of what would be of benefit to the cattle feeder.  Nonetheless, it is what we have to work with and since there is no premium to work with, making cash sales or cash forward sales in the fat market may be the only way to achieve a premium over futures.  Energy is believed to have resumed its down trend and aspects of the economy are pointing more towards further contraction in discretionary spending than expansion.  With beef production teetering between down slightly to up slightly is great testimony to the cattle feeder’s ability, and the working of the agenda, to produce more beef with the number of cattle available.


Feeder Cattle:

The spread between September feeder cattle and February fats is at approximately $71.75.  It has been wider and narrower, but seemingly very wide to profit from in physical production terms. This week’s realization of how much price movement has to transpire to be profitable makes me look at these spreads even harder.  Seemingly, with the spread backwards to profitability, it leads me to anticipate it trading in a manner that narrows the spread.  Although it produces a relatively large position, I recommend selling September feeder cattle and buying February fat cattle in an attempt to narrow the spread between the two.  This is a sales solicitation.  A close of the spread above $73.20 would exceed a previous spread width made on 4/26. That is about 3 days from the April high on fats and feeders.  Cattle feeders and futures traders have both been aggressive at bidding feeder cattle prices higher.  With today’s new highs, backgrounders can achieve a maximum sale price of over $270.00, all the while maintaining a minimum sale that is higher than ever achieved in cash markets.  Whatever you were waiting for to make a move in your marketing, today is the highest price of futures since March 25th.

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