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Cash cattle reach $104

Cash Cattle saw an unexpected jump this week to $104 in the southern Plains of Texas and to $165 in Nebraska cattle country.  At
the risk of sounding like a wisenheimer, it is the basic relationship
of supply vs. demand that has been behind this rally. Demand is
currently very strong (and getting stronger) and the supply has recently
been managed to the point where higher prices are the result.

 

It
seems that nearly all the aspects of the demand side of the cattle
market are at or near record highs this week. Feb 2011 Live Cattle made a
contract high this week at $106.95; we haven't seen prices like this in
nearly two years.  The funds are again adding to
very large Long positions. Texas traded cattle this week at the
second-highest price on record ($107.21 on 10/18/03 is the current
record). The HRI market is near three-year highs this week. Boxed Beef
values are near a three-month high this week.

 

On
the supply side we are seeing beef in cold storage at the lowest level
since 2003 and recent Cattle on Feed reports do not show large supplies
on the horizon. Show lists in the country are current and we are
entering a time of year where weather can change and turn inclement with
little or no notice.

 

The
fact that we saw packers come out and buy cattle on Tuesday (early in
the week) and buy a very large quantity was also a good sign that demand
may outpace supply for at least the rest of 2010.

 

 

Kevin H. Penner

Commodity Services, Inc.

Des Moines, Iowa

(800) 274-2074

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