031009 Tight Choice Supplies Propel Cash Cattle Prices

High Plains Journal - With cash cattle prices already at record highs, prices soared even higher Tuesday on a unique combination of outstanding demand and shrinking supplies.

Live prices jumped a surprising $4-5, with sales in the South at $93-95 and in the North up to $100.

"Such a bullish feat is even more staggering given the fact that it surfaced at a time when feedlot values were already at the highest in the history of the game," DTN livestock analyst John Harrington said.

"The power behind this market continues to be a unique combination of outstanding demand and shrinking supplies. There have been numerous times over the last three months when we've been hard pressed to single out the major driver of the two (i.e., they've both been that strong). Yet there's little doubt as to who is the lead horse in this latest and most dramatic (to-date) price parade: extremely tight choice supplies still getting tighter," Harrington said.

Packer margins have been narrowing for two weeks, and packers have responded as they usually do -- cutting kills. That's why Tuesday's sudden rush to procure inventory at record prices was such a surprise.

What's the explanation? Harrington said he believes it indicates packers recognize just how tight late-year supplies of choice cattle are, and they worked quickly to acquire enough inventory "as a form of damage control."

Another explanation, Harrington said, was that packers are anticipating renewed retail beef demand.

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