Livestock –
We’ve seen a pretty solid bounce in boxes here lately. This seemingly has stopped the bleeding of the packers’ bottom line for now. I’m told packers are pretty cleaned-up in terms of their beef offerings so look for boxes at worst to remain steady but note there is a pretty solid seasonal for boxes to appreciate in the month of March.
Showlists distributed yesterday surprisingly showed an increase vs. last week. Considering the talk of tight cattle supplies this confused me at first, but then when you look at the structure of the market the board is screaming for producers to pull forward their cattle. As the attached chart shows, the one-year calendar spread (contracts 1-6) is at its highest inverse since the initial Canadian BSE situation. This chart will dip when Feb rolls off tomorrow but it still remains elevated. This pulling forward of supplies raises an interesting question…will these deferred discounts be fully realized if the feedlot conditions remain this level of current going forward by pulling these supplies ahead? Someone smarter than me will have to answer that one.
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