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Ridgway, IL | I think the really interesting thing, is the packers are cutting the kill rate now. current gross packing margins are 200-220$/hd. Yet, the packer knows if he doesnt get ahead of himself and lets the market come along a little on its own, that figure can be increased by 50% or more in a month. They're really good at controlling the capacity utilization to manage margins. Moderate kill now, push cattle back a month then you have heavy carcass discounts plus large volumes. I dont get to see a full on rundown of the boxed beef market, but i imagine that is now in a carry as well.
Another thing, i feel like good weather around is helping ranchers and yearling operators hold onto feeder cattle longer than normal which is shown by the fc market.... this is probably also impacting the supply of non-fed slaughter animals as well... meaning if they're not ready to ship their calf crop to town, then they're also not culling cattle yet either. I think this is being shown in the choice/select spread, which traded down to Zero y'day. Seasonally, this week the culls should start coming to town and the choice/select spread forms a bottom as more lean beef becomes available for blending... it looks to me like all this stock is going to slam into the market at once at some point over the next 6 weeks. Increasing fed supplies being held on feed more days, all the non-fed supplies moving in a tighter period of time, and all these feeders hitting the market at the same time.
We continue to stay short fc and lc, sure a guy could do some short term trading to scalp a few bucks as this thing chops around but i think you run the risk of not being short when the market breaks. I'll leave the scalping to the professionals. | |
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Fat Cattle
