US cattle-on-feed report shows good outlook

Friday's U.S. Department of Agriculture (USDA) cattle-on-feed report was said to be one of the most bullish in months and analysts believe it could spark a long-awaited rally in futures.

It could even turn cash prices higher, although in the short term, there still are plenty of cattle to work through, the analysts said.

Market analysts said the cattle markets, along with natural gas, have not followed a rally in the stock market over the last few months. This report could be the spark that ignites a rally in the spring and summer contracts that bleeds over into support for the nearer contracts, they said.

Jerry Welch, market analyst and broker at Commodity Insite, said he foresaw fed cattle rising to $1.10 to $1.25 per hundredweight on a live basis in the cash market in the next one and a half years. This is a level that could price out some demand since poultry and hog markets are able to ramp up production faster than cattle producers.

The U.S. is going into a year when it will have a shortage of beef, pork and chicken with an economy that should be recovering from recession, said Welch. It came into 2009 with a similar shortage, but the U.S. was sliding into the recession and is still bouncing along the bottom.

Friday's report is welcome news for feeders, who experienced under-performing slaughter cattle prices in December, he said, and hopefully the data can be a catalyst for a rally.