Expiring February live cattle futures ended the week at $165.20, up 5 cents. Still, that marks a weekly advance of $1.625. Most active April cattle also rose 5 cents to $165.375, ending the week 72.5 cents above last Friday’s close. March feeder futures skidded 15 cents to $189.075, thereby marking a weekly rise of $2.55. Winter storms this week didn’t really effect the Plains cattle all that much as I initially thought it would. In my opinion this will maintain or even increase producer leverage when bargaining with the packers. Thursday’s active trade at $163.65, up $2.48 from the week-ago average, illustrated the latter, since many in the industry expected packers to hold out until after the release of the Cattle on Feed report in hopes of keeping a lid on prices. The February contract’s premium to cash also implies great strength, since it expires next Tuesday. I would be looking for the whole complex to continue rising next week.
The Cattle on Feed numbers are as follows:
The USDA Cattle on Feed report stated January feedlot placements at 96.4% of last year, a bit below industry expectations for a 2.9% annual decline. Conversely, January marketings were expected to post a 3.9% annual gain; the USDA figure topped that level, rising 4.2% annually. The net result was a February 1 U.S. large-lot feedlot population of 11.704 million head, down 68,000 from the anticipated figure. The numbers should prove supportive of futures on Monday’s opening.
Something to keep an eye on is the fact that the 10 year average of cash cattle prices usually show a top in late March but, with marketings being extremely current and weights being well below year ago levels, I believe cash prices could keep climbing into late April. Once grocers start passing the surging costs for wholesale beef on to the consumer, demand will start to hinder and the bull market will start to slow.
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Peter McGinn
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Walsh Trading, Inc.
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