Cattle traders rang in the New Year with record cash prices for fed cattle. Prices advanced for the second consecutive week, with cash trades in southern feedyards at $135 to $137 and a few at $139 per hundredweight. The gain for the two-week period around Christmas and New Year’s was $7 per hundredweight, or roughly $100 more for a 1,400-pound steer. Some cattle sold out of northern feedyards at $216 per hundredweight dressed.
Cattle feeders may have been giddy with the market rally, but not everyone in the cattle complex is convinced this bull market has legs. Futures traders remain cautious, and February Live Cattle contracts closed Friday at $136.25, slightly below the cash trade. April contracts closed at $136.50. Futures prices moved only modestly higher by $2 to $3 over the past two weeks. Futures traders note, however, the February contract is at or near an all-time high.
The refusal of futures traders to buy-in to the New Year rally centers around sluggish boxed beef sales and packers inability to attract retail buying interest at current prices. Packers were losing more than $50 per head on every animal processed before this week’s price gains, and the higher bids are sure to push packer losses beyond $100 per head. Heavy packer losses are never a good foundation for a lengthy price rally.
The coming weeks, however, will determine just how stable the legs are under the cattle market. Retailers are likely to show interest in restocking their meat cases with beef following the holidays, but higher wholesale prices may temper some of that enthusiasm.
The futures markets also suggest caution for stocker operators. Many cattle purchased for grazing programs show breakevens that are beyond the $170 level that late-summer feeder futures contracts offer.