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CME: Market Ready Cattle Prices Sustain Impressive Rally

22 February 2017

US - Market ready cattle prices, basis the USDA-AMS 5 Market average, have sustained an impressive rally from Christmas week of 2016 to early February, according to the Steiner Consulting Group, DLR Division, Inc.

Price derived from formula or forward contracts topped out in the last week of January close to $123 per hundredweight. This pattern trailed the pattern in cash cattle trade by a week, which is typical. The peak in cash cattle trade was about a dollar per hundredweight under the formula and forward contract high.

The first week of February saw values for forward contracted cattle slide $6 while cattle priced off of formula maintained prior week values. Volumes of forward contracted cattle moved up to account for 12 per cent-13 per cent of all fat cattle market receipts in the last week of January, compared to the 9 per cent-11 per cent range during the first three weeks of the year.

Direct cattle sales receipts, which ran at 25 per cent-26 per cent of all fat cattle market receipts during the first two weeks of the year, popped up to 32 per cent of total receipts in the third week of January, when prices for cattle in the direct sales market hit their highs.

During the last few weeks, when forward contracted cattle volumes have been elevated, receipts of cattle in direct sales slipped back to a 25 per cent-26 per cent share of total receipts. It was interesting that last week saw the forward contract share of cattle market receipts fall back to 11 per cent while direct cattle sales moved up to the 32 per cent peak, similar to the third week in January. Total receipts (direct sales, formula, forward contract and negotiated grid) during the last week were the highest of the year to-date, surpassing the prior high of the third week in January.

Cattle values were stoic in the midst of large trade volumes last week. In the wake of the price peak in the third week of January, cattle prices in the forward contract market have run at a $4-$5 discount to direct cash trade and cash trade has moved very little in the last three weeks. Yet packers set a record for the year-to-date in cattle bought in the direct market.

Concerns about beef or cattle supply and demand changes in upcoming weeks are not in evidence as the Lenten season approaches. February weather has been spring-like in major cattle feeding regions, which should abet excellent weight gains for cattle in feedlots. It is a blissful situation in cattle market, for the time being.

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