CATTLE PRICES MAY REACH SEASONAL PEAK EARLY

CATTLE PRICES MAY REACH SEASONAL PEAK EARLY

U.S. feeder cattle prices could reach their peaks earlier than usual this year if the current rally runs out of steam.

Typically, prices for cattle on feed are lifted to their seasonal highs in March and April, when live cattle supplies historically reach their lowest levels and beef demand is renewed because of greater outdoor cooking.Moreover, lighter placements of cattle at feedlots during the summer and fall contribute to an overall supply reduction.

But this year, the seasonal top may be reached in late February or early March because it will be extremely difficult to sustain the recent sharp advance in the cash market for an extended period, analysts said.

Analysts generally agree that this year's prices for fed cattle could reach a seasonal top of $79 to $80 a hundred pounds. But it's highly unlikely that prices will hit or exceed last year's seasonal top of $82.25, made during the third week of March.

"I do not believe we're going to match last year's (fed cattle) price peaks," said Mike Sands, head of the Western Livestock Marketing Information Project.

Fed cattle prices have posted consecutive weekly gains since the first week of January and are within striking distance of $80. Top steer prices traded at $79 Tuesday in the Southern Plains, compared with a top of $71 Jan. 2, the U.S. Department of Agriculture said.

The cattle market could top earlier than usual this year because near-term supplies are becoming available after being delayed by a series of winter storms, which hurt their rate of growth.

Many of the storm-damaged cattle are recovering along with the improved weather and will be available for marketing in March and April, which means additional supplies and will give packers less of an incentive to bid prices higher.

Cattle prices also may hit a seasonal top prematurely as packers try to bid prices lower to offset unprofitable margins, analysts said. The U.S. beef- packing industry is currently showing losses of at least about $20 to $25 a head.

Pinched margins have forced packers to cut slaughter levels. The reduced kills have boosted wholesale beef prices, allowing packers to pay higher prices for cattle.

But retailers are expected to balk at paying higher prices for beef, especially with anticipated large supplies of pork and poultry available for featuring. If that occurs, packers will be left with plenty of unsold beef or will be forced to take steep discounts on the meat, thus further eroding

margins.

And with ideas margins will show little improvement in March or April, Mr. Sands believes it's unlikely that packers will continue to aggressively chase after fed cattle supplies during that period.

"Will they be content to operate in the red for four months?" asked Mr. Sands.

Analysts also believe the current bullish attitude among cattle feeders could work against them. Some of that bullishness is underpinned by last week's USDA biannual cattle inventory report, which showed the nation's herds expanding at a slower-than-expected rate.