Mackey: Futures Rout Gives Packers Cheaper Inventory
The rout in cattle futures continues to pressure cash cattle. With each break the cash marketer loses ground and eventually capitulates at lower money. Last week’s market traded primarily at $174-175 per cwt., $3 lower compared to the previous week.
The South, tempted by basis, saw early week sales at $175 cwt. live. As the week continued to unravel, more sales would occur. The North, encouraged by the Choice-Select spread, would ask for more money than the early week activity. It would take until the back half of the week, but unfortunately, the higher grading cattle would trade par.
Futures would break further and cattle feeders would move at $175 live and $275 dressed. Packers felt it necessary to continue to back bids up as they day went on. Sales would be reported as low as $173 per cwt. live and $273 dressed.
A total of 116,000 head cash and grids combined would be the tally on Friday’s numbers. Roughly 37,000 more than the Holiday shortened week. The cheaper inventory should pad the pocket of packers for the time being. The industry has seen some evidence of this with a few Saturdays put in by a few plants. Harvest came in at 635,000 head, much improved from the previous week, but still off last year’s pace.
Looking ahead, many will anticipate this improved margin should encourage bigger kills. Cattle feeders will look to establish a landing spot and trade cattle at a much improved basis.
