Kevin Penner: Higher packer profitability spurs higher prices
Cash cattle were able to trade at higher levels up to $93 last week. Major trade occurred at $92.50 and calls for this week are Steady. We have seen some packers out already this week, bidding $91 and feedlots are generally offering cattle now at $94.
The higher trade last week was spurred by continued profitability by the packers and also by further rallies in the futures markets. Meatpackers are reporting that their margins are near the high for the year and as long as they can continue to buy cattle, kill them and sell the beef at a profit we should expect cash prices to remain near this level. Changes in the value of boxed beef should be closely monitored; if the price for meat moves lower then we could see the bids by the packers slip as well.
The futures rally also helped cash cattle trade at higher levels last week. Despite a failure last Tuesday, we saw strength on The Board all day Wednesday and Thursday last week. By the time futures slipped on Friday we had already traded cash cattle for the week. This week looks similar already and the continued strength of the futures should bode well for steady/higher cash cattle this week.
Kevin H. Penner
Commodity Services, Inc.
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Des Moines, Iowa 50325
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