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When Will the Bull Run in Cattle End?

(ATCHISON, KS) — For several months, cattle futures and cash trade has been continuing to work higher and higher, reaching many record levels especially on the cash side of the trade. The question now is, when exactly will the bull run in cattle end?

Mike Zuzolo with Global Commodity Analytics says that one factor he is watching over the next several weeks is weather and how any adverse conditions impact supply that is currently not being challenged by other proteins in the marketplace due to issues stemming from highly pathogenic avian influenza (HPAI) across other sectors.

“You know the big thing that I noticed not just this week about the cattle trade and the cash market still leading a very clean market and the cash trading north of $205 in the south and north of $205 in the north, very tight market, shows us the weather side of the equation,” according to Zuzolo. “The packers are coming to the market because the demand remains stout and they’re worried about the supply side so you can’t get much better of a market than we have right now. But the bigger piece of the puzzle came last week on USDA’s WASDE report on Friday when they spoke specifically about HPAI cutting egg production, cutting turkey production. Really limiting competing protein supplies that would compete with beef and pork normally and it’s very reminiscent of the HPAI outbreak, one of the first ones we had to really take notice of back in 2014 and so this is a really key dynamic we want to keep track of on the supply side is there’s just not a lot of protein out there to be able to compete with these record high feeder and fat cattle prices and it really forces the packer into the marketplace.”

Zuzolo adds that the longer term weather models could play a role. “If some of the longer term weather models, which are suggesting a very cold winter all the way through into March and potentially a couple more snow storms, we could be talking about real tight marketings and potential death loss unfortunately as we go through the winter time. Something we weren’t ready for 30-60 days ago so just watch the cash and stay current right now on the cattle. I’ll be watching very carefully for a significant pullback if the weather trend changes.”

When asked if producers could possibly struggle to make a profit at these lofty levels, here’s what Zuzolo had to say. “What I would say and this goes back to the cow calf and the and the feeder cattle market. I looked at Aberdeen, South Dakota today. I looked at Bassett, Nebraska today and Bassett had five weight steers go for $383.50. I don’t know how you’re able to make money on that and in all seriousness if this corn market goes up another leg so I do think that we’re getting to levels and feeders especially that are not going to be justifiable six months from now if you don’t have almost everything go right for you,” says Zuzolo. “And that’s where that dollar comes back into play. That’s where Wall Street comes back into play you got to have a weaker dollar, you got to have a very strong Wall Street consumer out there ready to pay these prices.”

Zuzolo also mentioned, in terms of managed money, a record high net long position by fund traders in feeder cattle that could potentially flip over at any time. Hear all of Zuzolo’s comments on the Wednesday episode of Market Talk below. The cattle comments start around the 16:00 minute mark of the program.

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