Livestock markets building in winter storms, analysts say
After being affected already this year by snowstorms -- two again this week, and another one expected next week -- the cattle market is getting used to Mother Nature affecting price direction.
As cattle weights have dropped recently, the after-effects of January's wintry weather is still being felt. The wet, snowy weather in the last week over the Plains states has compounded stress for cattle in the feedlots.
Since early January, the cattle futures market, mainly deferred contracts, have jumped $6.00 per hundredweight. For the cash market, the wintery weather has meant a $3-$4.00 boost.
Because of the winter storms, cattle growth performance has suffered and carcass weights have dropped 5-pounds below a year ago, John Harrington, DTN cattle analyst said.
"The feedlots are just so muddy. Plus, with the cost of gain going up from higher corn prices, fewer cattle are being placed in feedlots," Harrington said.
The difference between the winter storms, may be the late February storms don't appear to be packing as big a punch.
Adam Frick, Allendale Inc. livestock analyst, sees this week's storms as having less of a market impact than the storms at the first of the year.
"The conditions we are seeing now are the taking of cattle off feed and the weight loss," Frick said. "As opposed to the major blizzards that killed livestock in December/January. The temperatures now have not been that cold, it's just been muddy and a mess."
For this week, Frick sees cattle futures prices reaching $94.00 per hundredweight, and $93.00 cash.
"A lot of people have been predicting a steady to higher market for the past few weeks and have been disappointed. I think the market gets better, despite the storms."
As of Wednesday afternoon, the market is still waiting for the results of this week's cash live cattle trade.
Dan Vaught, AG Edwards livestock analyst, said the live cattle futures have anticipated this week's storm.
Vaught agreed that not a lot of market impact from this storm is expected.
"This week's market action has been mainly impacted by the previous weather storms and the bullishness of the USDA's Cattle-on-feed report," Vaught said. "The market has been anticipating the potential damage inflicted on the feedlots in the northern Plains, because of wintry weather."
Vaught added, "Signs the market was anticipating the wintry weather this week was the strength of the nearby April and February contracts displayed on Monday. The COF report was construed as bearish to the nearby contracts because the report stated January feedlot marketings at low levels."
Beyond winter storms, a bigger danger is the disappointing cash market, Vaught said. For the past three weeks, the cash cattle market has been stalled at $93.00 per hundredweight.
"If we see the cash market unable to advance or decline this week, I would think the nearby cattle futures could suffer a fairly significant setback," Vaught said.