Cattle prices surged higher from a multi-year low during mid-to-late December. However, futures have consolidated over the past two weeks, with the February contract holding just below the recent high near 138 cents per pound. So far, the consolidation pattern suggests futures could make another drive higher.

Fed cattle prices have also rallied sharply from last month’s lows near $118/cwt. to $134 last week, one of the strongest price advances in history. Carcass weights continue to ease seasonally and recent winter storms are accelerating the decline as feedlot performance is suffering.

Beef price strength has been impressive the past few weeks. Both choice and select cutouts are up nearly $40/cwt. from their December low. As the chart indicates, beef prices have rebounded to the highest level since September. Beef prices have also continued higher as futures have consolidated over the past 1-2 weeks. Stronger beef prices should help support cash and futures prices over the near-term. Still, we view follow-through strength as an opportunity to establish hedge coverage.