Today's U.S. Department of Agriculture (USDA) monthly Cattle-on-Feed Report shows very tight cattle numbers in the nation's feedlots, much smaller than a year ago at this time. The veracity of these reports is somewhat open to question, as they are not actual counts of cattle, but computer simulations and estimates--but the traders at the Chicago Mercantile Exchange treat them like the Holy Grail, so they are influential.
This should mean higher cash fed cattle prices through this fall, which is very good news for cattlemen. As this blog has written before, however, Merc traders only make money off volatility and don't care if the market goes up or down--as long as it moves. That's how their sole source of income--trading commissions--are generated. You can bet that they are figuring out all the angles as I write, along with their Big Three Packer and Feedlot customers, to feather their own nests.
This latest report is good news for cattlemen as long as they figure out how to make it that way. The interests of cattlemen who actually make their living that way, and the Merc traders, frequently diverge. In any case, one considers Merc traders a reliable friend at their own peril.
In a bigger context, it does mean retail meat prices will stay high this fall and winter, and this will percolate to some extent down to individual cattlemen. High corn and energy costs, among other inputs, leave this somewhat of a mixed blessing, but the outlook is much more favorable than what had previously been forecast.
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