Positive Basis Encourages Lower Trade
Last Monday the cattle market felt the same negativity as all other markets with the uncertainty of what may happen to global trade due to the effects of the coronavirus.
By the time trade began on Thursday the markets flattened out, with no gain giving packers the ability to buy cattle two dollars lower and hedgers the ability to get out of positions with a positive basis. $122 was the dominate trade level in the south, with the north garnering up to $122.50 on cash cattle.
Now that we are entering the month of February cattle supplies should begin to tighten somewhat in the south moving forward. As supplies tighten, feeders could gain leverage back to push the market back up. Leverage generally means patience.
The feeder, regardless of hedged or unhedged, will need to hold tight to push the cash market up. As we get into spring the price for fed cattle is likely to fall, as inventory numbers will exceed what we are currently facing.
