CATTLE: STEADY – HIGHER

Much unlike a week ago, it is not all bad in the cattle market this morning. Packer processing margins have witnessed serious improvement over the past several weeks to the point where some now estimate margins at their best levels so far this year. As a result, last week’s slaughter total was the largest of the year at 672K head and will be expected to climb higher yet in the weeks ahead. In addition, Memorial Day weekend weather was mostly positive for our official national “grilling weekend” and will have the trade expecting solid retail clearance numbers to be reported later today. The question on the trade’s mind this morning is whether packers will need to be more aggressive in the cash market this week to fund their increased slaughter rates? Futures tried to bounce late last week on these thoughts and will likely take another stab at a rally today. But, it is that time of year that even higher futures may not necessarily result in higher cash cattle as basis seasonally erodes. A 5-year seasonal shows Kansas fed cattle basis trading +$1 this week, +$0 two weeks from now, and -$1 by July.

Kyle Smith, Mike O'Dea, Ben Parks, Collin Hulse, Ingrid Gronlund, Christopher Shockley