Live and feeder cattle futures rallied on Tuesday.
Brad Kooima with Kooima Kooima Varilek says the cattle market has just felt better the last week with cash finally bottoming and futures posting higher weekly closes.
Last week’s 5 Area Weighted Average Steer price came in at $182.11, which was up 93 cents, finally bottoming the cash market.
Kooima says, “The last two weeks where you saw a packer that what willing to take on inventory in that $180 to $181 slot I thought was encouraging. You have a packer that’s got some margin and some Saturdays are getting added,” he says.
Plus, at the end of last week bids in the North kept getting better, he says to the point that there was some $184 bid and largely passed.
“A few took it but those cattle went Monday morning already,” he adds.
The other thing Kooima likes about the cash action is the North is current.
“The weight problem is not in the North. Usually that’s where it is with the farmer feeder, but that’s not the case now and I think that’s a great sign this time of year. If the calf crop is cleaned up we should have good going before we get to the yearlings,” he states.
Tuesday both live and feeder cattle futures saw strong technical buying and Kooima says the December live cattle contract needed to close above $179.50 to trigger more short covering or outright buying by the funds.
“I like the leadership in the feeder cattle as well,” he says.
What about cattle prices in the 4th quarter?
Kooima says, “To me the 4th quarter is going to come down to how current we are and what we do with cheap feed and high breakevens. In my mind there is no doubt that there is less supply, particularly as you get into 4th quarter and into the 1st quarter.”
He says it comes down to the fact the cow kill has finally slowed year to date and producers will need to start retaining heifers.
“So, now what are we going to do with the females? We’ve had two back to back record setting years of how many heifers we’ve fed as a percentage of steers. That cannot continue. The cow guys have to save some heifers or go out of business,” he says.
If that happens it could drop supply by around 5%.
In the mean time, Kooima recommends producers stay current with their marketings.
