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| Yes, things seem to be heading that way. Expansion of the cattle herd has been put off for a long time, and we might finally be seeing the turn. For the change to be major, we should see low to no profitability in grain production along with very good profitability in cow/calf operations. IMHO, we need to make it attractive for the smaller operator to get back into cow/calf. Again IMHO, I have no doubt that will happen if we keep prices high for awhile.
As for this rally - it is an interesting one. The last couple of highs in 1993 and 2003 do tend to point to right about now for a major high - we'll see.
For anyone who likes charts and models, here is a picture of what I think is happening right now. The bottom is a model using fundamental data showing how many cattle have been going on feed. (It's not that simple, but that is the general idea.) The top shows charts of both FC and LC with smoothing factors, and both are roll-adjusted contracts. Note how the model has been running bullish (blue) for some time, and how the prices have not really responded up until very recently. This, IMHO, shows that there has been resistance to price movements that should have begun to ration dwindling cattle numbers awhile ago, and now that it is painfully obvious to anyone needing cattle, the market must respond much more violently than it would have had to if prices had risen earlier.
Just my guesses. And, no, I don't have any idea how high it will go or how long that will take. The 93 and 03 markets, however, and a ten year pattern in cattle going back a long way (I have seen it back to about 1890), make this a perfect time for a good run. The big question, however, is demand, and there I don't think anyone knows.
 (lc fund model.jpg)
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 lc fund model.jpg (51KB - 27 downloads)
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Feeder cattle
