What About Cattle Prices Moving Forward
Sep 04, 2012
Q. Kevin, we haven't seen you comment much on cattle lately and were just wondering your short-term and long-term outlook.
A. As most of you know, I have been somewhat "neutral" cattle prices the past few months. If you look at the OCT12 Live Cattle contract you can see the market has traded in a channel the past five months between 120 and 127. Many readers write in wondering why I am NOT extremely bullish cattle prices near-term with the herd continuing to decline. Unfortunately, it's not that simple. Even though US beef production should be smaller than last year, beef imports look like they are going to be much larger and beef exports much smaller. Obviously the global economies will play a big determining factor in overall beef price. If the Asian and European economies continue to slide beef demand could fall substantially. Keep in mind domestic beef demand will also hinge on the direction of the US economy. I am not saying we couldn't move higher in the near-term, in fact, I am moving my rating to slightly "bullish" for the cattle market near-term, especially as we move closer to pre-holiday buying and fewer cattle moving into the feed lots. I am thinking cooler weather might spark a little more domestic demand followed by extremely tight supplies during the 4th Quarter of 2012. On the spec' side I will be waiting for a little pull back before I buy the DEC12 or FEB13 live cattle contracts. Producers wanting to make sales should simply continue to hold tight for the time being.
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