The Cattle Stampede
Geoffrey A. Smith
So what does a steak cost these days? Pretty pricey huh? And I would not expect prices to come down in the near future. Ranchers are not taking their herds to the feed lots, and therefore, there is less beef available. There are several reasons for this. First, over the past several years cattle country has been in a drought. This year has been good for weather, but now ranchers are in catch up mode. The droughts thinned the herds and with low grain prices and much improved foraging conditions, ranchers have opted to keep their calves to grow into cows to produce more calves. This can be seen in the Cattle on Feed report that is sent out through the USDA. There are fewer lighter weight calves at the feed lots and more heavy weight cows. And with improved pasture conditions this fall, this trend will continue.
The chart below is a weekly chart with a 3, 21, and 65 simple moving average. Since September of 2013, the live cattle market has been moving higher. Interestingly, cattle prices tend to decline from October through February, however, prices moved higher this past winter going counter to their “normal” trend. Prices pulled back in spring due to higher grain prices, but renewed the rally as crop surpluses began to trickle in from the World Ag Supply and Demand reports. There is big support at the $135 per hundred weight area, and short term support at the $145 area. Though it has pulled off its highs after a $27 move, it has taken out last week’s high and will remain strong above $150. Good Luck Trading.
