Fed cattle fundamentals remain positive through the start of the second quarter. Good prices kept feedlots current and in some cases pulled cattle ahead. With months to go before a significant number of calves hit the market this tight supply situation will likely continue. Retailers generally feature beef through the second quarter as BBQ season moves into full swing. However, as retailers push higher wholesale prices onto consumers and higher oil costs compete for consumer dollars it will be important to watch spending habits and beef demand. We also have to keep an eye on the Canadian dollar.
The wait for the grass to turn green is always supportive of the light-feeder market. This year’s snow pack ensures grass is ahead and leaves buyers eager to fill pastures. The risks to feeder prices ahead are deferred live cattle futures and cost of gain. To date fourth quarter live cattle futures have been supportive. If feeder cattle breakevens get too high buyers will start to pull back, particularly on heavier feeders since the ones placed now hit a marketing period of larger fed cattle supplies. This reality generally caps 850-feeder prices this time of year until they pick up some strength again later in the second quarter.
Cull cows usually peak later in the second quarter. But with prices already at record levels it’s hard to know how high they will go. The fundamentals suggest the highs are yet to be had. Supply is limited and the last two years we have seen prices rise over 30 per cent from January to the spring high. However, at some point these record prices and a dollar at levels not seen in more than three years will begin to limit this cow market over time. Bull prices will likely remain firm.