Can Our Counter-Cyclical Cattle Markets Hold Up?
By Jeff Rose
In early June, a major market jump saw cash cattle trade close to $190.00, but futures didn’t really keep pace. June ‘23 Live Cattle hit $180.25, an all time high.
On-feed numbers will likely continue to tighten and carcass weights are down, restricting supplies. If the drought eases and heifers are held for replacements, supplies will get even tighter.
The big question when we get these kind of rallies is always, will demand hold up at this price level?
So far, demand is holding up pretty well. Packers argue they are paying more for cattle than they can sell the beef for, but that seems to be the way this industry works.
For two years during the worst of COVID, packers made record profits. It’s the cattle feeders turn now, although I doubt it will last for two years and not many will make $800.00/head.
So, will we see $200.00/cwt fat cattle? If this was still February or March and we were selling $190.00/cwt fats, I would be more inclined to think so. But now that summer is here, we face the normal price downturn that comes with the season.
So far we have been in a counter-cyclical situation and numbers are getting tighter. Will packers cut kills? Will demand wilt in the summer heat?
Even if demand slips and packers cut kills, reduced ready numbers could still be our trump card that keeps prices high through the summer.
Most conversations I am having with producers are more optimistic than those of the past few years. Cattle can be locked in at a profit and many already have been. Of course many wonder how high it will go.
Typically, we are conservative and recommend locking in a profit when you can. However, if your financial situation is solid enough to allow it, now may be a good time to leave a small portion of your production unpriced.
