Cattle prices have been on a downward trend since the 2014 highs. August feeder cattle, as we’ll discuss specifically, are trading at $143 per hundred weight(cwt), last year they were at $194 and at $182 the year before that. Over the last ten years there have only been two significant periods under our current prices. We’ll examine the placement and marketing numbers as well as the choice vs select spread as it relates to the domestic demand we believe will drive prices seasonally higher through the end of the summer.
We frequently discuss the effectiveness of using the commercial trader position as a proxy for fundamental data. We began looking at this years and years ago in the agricultural markets due to the inelastic nature of these annual markets. Adding that these markets are controlled by individuals whose livelihoods are based on the successful calculation of supply and demand and you begin to see the value in their collective forecasting ability. Thus using the commercial hedging activity as a proxy helps put us on the side of the sellers when there is forward production to be sold above their predetermined value area just as the end users put us on the side of the long hedgers supporting undervalued prices.