My Thoughts on Cattle Prices
Apr 12, 2010
I have had a lot of question as of late about the cattle market, and in particular where I think we are headed. To start with we have seen demand pull back just a bit, but it still remains strong. The word I am hearing from some of the bigger players is that if demands continues to stay strong we will see combined Choice/Select cutout values up in the $170 range very quickly. I think you also have to keep an eye on the beef markets very strong tendency to rally late during the month of April. I read recently that within the last 12 years the combined cutout during the month of April has gained by an average of $5.44, this makes $170 look like a no brainer. So in the short term, I think we are headed higher.
If you are looking for me to make a prediction, I guess at this point I would have to figure FOB Steer price will try and test the $101 level (2008 high).
Personally I think once we make this last late seasonal push we will start to see a significant pull back. My concern is that the packers have a fairly extensive inventory of cattle starting to stack up, and therefor will not be driving the markets higher or trying to chase prices just to keep their doors open like they have been forced to in the past. Not to mention the fact that I think many large speculators and others who have been long this market will start to take profits off the board and cash in their chips. With limited buying from the packers and the speculative traders needing to sell in order to offset their profitable long positions, I think we are due for a significant pull-back after a short push higher.
In summary, Look for the market to start fizzling out after another seasonal push to new highs. If you haven't locked in any at these levels I would advise seriously considering it.