Cattle & Ranch Report

June 26, 2024
Live Cattle:
August and October fats pushed to a new high today.  While only by a fraction, it will be more than interesting to see if there is follow through, or a last ditch effort to resume a bull trend.  Open interest has been increasing slightly.  I think it should be increasing as we need more participants and there is no shortage of adversity that could impact price action. Beef production is expected to climb through the remainder of this year.  With May placements so high, and the longer feeding time frames, it appears that beef production will grow into November.  While I don’t have the math skills for proof, but off the cuff, I think the elasticity of beef has hit a new high.  I say that as prices are at historical high and beef production at a 1.8% decline year over year. As well, only a fraction of a decline in cold storage.  So, beef and cattle prices are believed exceptionally skewed via a very small decrease in beef production and a very large price increase for both beef and cattle.
Feeder Cattle:
As the shortage of beef continues to be rectified through the agenda, I think it only a matter of time before we see some of the elasticity start to soften.  Futures traders seemingly have little interest in pushing premium back on to futures.  Today’s higher trade is believed a simple test of the current high end of the range.  Video sales pick up significantly starting next week and will run through July and into August.  With the premiums gone from the futures, we realize a sector of participants have already moved on.  That being, commodity funds and speculators.  The next sector will be more producer participation.  With no premiums now to work with, it will be interesting to see how they manage the price risk going into the video sales. The “all or nothing” approach seems well suited for some, but I do not feel the same way as “something” tends to be more satisfying than “nothing”.  The “all” part of the approach, I’ve never been privy to. Think about the elasticity again, the small decline in beef production versus the larger decline in cattle production, and then consider the consumer, rocking along with their 401k’s flush with equities at all time highs.  I continue to state these markets being at all time highs, due to them being a market and subject to change.

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