Feeder Cattle Near Peak? Maybe

Some cattle market analysts are saying feeder cattle prices may have hit their zenith for now and likely will retreat, and they may be right.

The nearby May futures contract Monday made it to a contract high of $150.95 per cwt before sinking and closing lower.  And this was after three very strong days of sharply higher closes.

For some, a temporary downturn may be logical after the strong showing late last week.  Long investors may want to bank some cash before reassessing market conditions and making further investments.

That may be an especially enticing scenario after Monday’s inability to hold to another day of higher closes.

Cash feeder cattle markets may soften as well, traders said.  There were ideas among futures traders Monday that many feedlots now are comfortably full of cattle, taking these potential buyers to the sidelines for now.

However, prices at the Oklahoma City livestock auction Monday were higher amid continued strong demand, especially for feeder cattle, and limited movement because of heavy Midwest rains and wintry conditions in the Plains.




But feed costs may be becoming a greater deterrent to higher feeder cattle prices as well.

The weekend winter storm in the Plains dumped a lot of snow on heading wheat, and freezing temperatures likely ruined the chances for a productive wheat year for many growers.  The annual Kansas Wheat Tour takes place this week, allowing a close-up look at the crop by many traders, agronomists and reporters, and their analysis of crop damage will be watched carefully.

In addition, heavy rain and cool temperatures across the Midwest last week may have put farmers there behind schedule.  If the corn crop is compromised, and the wheat is priced out of competition through lack of supply, feedlots may not be able to keep up the constantly higher feeder cattle market.

Many traders are worried about corn markets anyway.  After the USDA’s Planting Intentions report, March 31, a market reaction story by Reuters said global stocks of corn, wheat, rice and soybeans combined would hit a record 671.1 million tonnes going into the fall harvest.  While this would be the third straight year of historically high surplus, it would only be about enough to cover Chinese demand for about a year.

For some, that’s worrisome.  Chinese demand for grain and oilseeds is growing as their middle-class population expands.  Economic studies have shown that people emerging from poverty tend to use their extra income on food first – increasing quantity first and then quality.

So, if there is any hiccup in US grain production (an untimely Plains states blizzard that damages the wheat severely, perhaps??) world grain demand could take prices higher, despite record ending stocks.




Cattle traded on the livestock exchange Wednesday at an average of $131.14 per cwt, up $2.54 from the previous week.  Deferred sales ranged from $125.37 for steers and $125.48 for heifers.

Cash cattle traded last week at mostly $135 to $138 per cwt on a live basis, up $5 to $6, and at $215 to $219 dressed, up $5 to $9.

The USDA’s choice cutout Monday was up $4.49 per cwt at $226.27, while select was up $1.77 at $209.45.  The choice/select spread widened to $16.82 from $14.10 with 56 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Friday was $141.72 per cwt, up $0.34.  This compares with Monday’s May settlement at $148.60, down $0.95.