The final a number of weeks of 2022 and this primary week in 2023 have seen two substantial storms – delaying vacation journey sure – but in addition placing substantial moisture within the mountain west, some within the southern plains, and extra within the northern plains and higher Midwest. Will probably be some months earlier than the moisture is required however merely the provision is sweet information for the drought-stricken cattle and forage markets.
Whereas it’s usually a good suggestion to disregard value alerts given within the thinly traded vacation interval, however what small calf costs have carried out is somewhat noticeable. 4-5 cwt calves within the southern plains elevated from beneath $200 in October to about $230 in December. Lots of the market watchers that I discuss had anticipated a robust counter-seasonal market – however not of this magnitude.
Whereas calf costs have rallied and cow costs have been robust by the autumn, there are actually warning indicators within the system. The boxed beef composite worth has spent a while beneath $250 in December and confirmed not one of the big demand pulls of the prior two years. Likewise, beef primal costs have confirmed good seasonal demand however not the quantum enhancements of the prior years. Larger fed cattle costs and flat boxed beef values have resulted in packer margins being squeezed.
The live-to-cutout unfold was about $250 per head in November and there’s no post-COVID packer that I do know of that may make cash with that margin. I do know of and communicate with a number of producers that assume packing needs to be a nonprofit public service however the true world simply doesn’t function that approach. Hours and kills can be reduce. And I’m moderately certain welcomed by each labor and a few administration after the previous three years.
Saturday fed slaughter has been modest for the second half of 2022 and fell off sharply in December. In the meantime beef cow slaughter completed the second half of the yr well-above the prior yr. The exception can be for weeks 49 and 50. A portend of the approaching yr? Probably however two factors don’t present a pattern or change within the pattern. However a number of weeks in October chalked up higher than 80 thousand head per week in comparison with the rolling 5 yr historical past of 65 thousand head. I’m moderately sure what the USDA Cattle report on the finish of the month goes to say.
The Markets
What does the technical image say? The cattle charts reveal a persistent sample. There are long-term uptrends in place and resistance planes are being damaged as most contracts push into lifetime of contract highs. However the cattle markets don’t chart just like the corn or soybean markets. Cattle don’t bounce to new greater ranges. Relatively there are persistence strikes greater with interval sharp down strikes. Reside cattle contracts have traits in place and have damaged resistance – these are purchase alerts. Feeder cattle look comparable however will probably be attention-grabbing to see contracts take a look at life-of-contract highs from final August.
Particularly for producers, on this market, I’m inclined to suggest that individuals revisit their danger administration plans – each choices and LRP. It’s time to work in that routine of evaluating options for danger safety and act on these alternatives and costs transfer greater. Afterall July corn is $6.65, a lot hay is best than $300 per ton, and corn stalks are quoted higher than $150 per ton. Optimism is warranted for calf markets however the true optimism will solely be revealed with extra moisture.
Supply: Colorado State College
