Kevin Penner: Cattle market strengthens
Cash Cattle showed considerable strength last week trading at $93.00 - $93.50 / cwt and $148.00 - $148.50 on a dressed basis. A midweek rally at the CME Group emboldened feedlots to hold out until late in the week. A Thursday rally then allowed cash trade to occur at a higher level, despite calls for lower trade at the beginning of last week.
This week, we see similar circumstances. A lower close on the Board last Friday and a failed rally on Monday of this week. This does not set the stage for a higher cash trade. However, Cash Cattle are called Steady to $1 Higher this week and another day of strength in Chicago may be what again sparks this week's trade.
Positive factors lending support to the idea of a higher trade this week are: continued strength in the Boxed Beef market and tighter showlists for the week. Beef prices are reported to be at a 1 1/2 week high and tighter showlists means less cattle will be offered for sale to Packers. A look at the Oct and Dec futures contracts trading at 95.50 and 97.50 tempts feedlot owners to hold cattle for a few weeks.
Average packer profit margins are reported to be at a loss of $14.50 per head. This set-up will likely result in smaller Slaughter Totals this week which could temper some of the demand seen by buyers of cash cattle. Cattle are offered at $95 as of today and there have been no reported bids this week.
Kevin H. Penner
Commodity Services, Inc.
1901 NW 92nd Court, Suite B
Des Moines, Iowa 50325
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