Lower But…

Posted on:  12/09/2016

By Cassie Fish, http://cassandrafish.com

CME cattle futures are trading lower as fundamentals weaken seasonally. A pull back not a surprise after an impressive 15% rally in cash prices. Though lower, most active Feb LC is higher on the week as the 100-day moving average continues to offer support and inspire fund buying. So far this is the least ugly downward correction in a long time.

Zoetis

Packer bids are hard to find today and more cattle have been tripped at $110 in Kansas and Texas, some with time. This week’s lower market is almost history and the questions are centering on next week’s outcome- steady or more decline? Packers will likely be tough customers until the week after Christmas.

Boxes will be lower next week and packer needs limited, though it’s likely packers will continue to cheapen their inventory if the opportunity presents itself. Just how much break is on deck for the boxes remains to be seen but certainly $5-8. Slaughter estimates for this week have stayed in the range of 605k-613k, all depending on the size of tomorrow’s kill.

Packer margins have contracted to levels not seen since May, though still positive. Beef sellers will be looking for items to add value on as ribs continue to lose the remainder of the month and into January.

Futures are not yet oversold and may or may not hold the 100-day as this month progresses. If they don’t, a look at the 40-day could be next, which coincides with other chart support. Most traders expect this level to hold this month, barring a worse-than-expected boxed beef melt-down. Expectations are widespread that futures will rally again in January and very possibly eclipse the December 1 high to check the August high.

Copyright © 2016 The Beef Read. All rights reserved.
The Beef is published by Consolidated Beef Producers…for more info click here.
Disclaimer:  The Beef, CBP nor Cassie Fish shall not be liable for decisions or actions taken based on the data/information/opinions.
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On the Edge

Posted on:  12/08/2016

By Cassie Fish, http://cassandrafish.com

CME cattle futures, down hard immediately this morning, are trading just above key support today. Spot Dec LC so far has stopped its decline a nickel above the low for the week and a little more than a dime above its 100-day moving average. Taking out this level and closing below it will further build the case that cattle are in full retracement mode. Only Dec LC so far, so lower on the week, with Dec $1.50 under Feb LC, possibly headed to $2.00 under.

Zoetis

Cash bids are generally $110 in the south and $170 dressed in the north, well below last week and lower than the few cattle that have already traded this week. Some trade has occurred in Nebraska at $170. Packer needs have lessened and with boxed beef prices on the verge of a big break, led by the lower rib- there is every reason for the packer to be less generous this week than in the recent past.

Per the Wall Street Journal weekly retail meat survey, prices of all three proteins rose from last week and holiday hams dominated ads. Retail prices could very well have made a low for now and it may be next year before retailers decide to pass on more savings to consumers.

There have growing press reports as of late, documenting the drop in restaurant traffic the second half of 2016 and the rise in meals consumed at home. Bonnie Riggs, a restaurant industry analyst at NPD Group in a report entitled “Losing Our Appetites for Restaurants,” said the primary reason for the decline eating out is cost and the gap between eating at home and eating out is widening. Eight-two percent of all meals are now consumed at home, Riggs said in the report.

This fact puts more pressure on beef competing well at the grocery store against pork and poultry making it clear that in 2017, when total protein supplies will post another record high, beef stays in the mix each week and ground beef becomes a staple.

As the rib tops this week, the chuck primal sank to new lows for the move, printing the lowest last night since July 2012. Since some of the cuts in this primal are typically consumed in ground form, this weakness highlights the trend that has been underway since the market topped 2 years ago, the weakness in the end meats relative to the middles. Back then there was less grinding material available from cows and imports the fed ends were in high demand. This is no longer true as expressed by last night’s quote of the largest primal of the carcass.
Copyright © 2016 The Beef Read. All rights reserved.
The Beef is published by Consolidated Beef Producers…for more info click here.
Disclaimer:  The Beef, CBP nor Cassie Fish shall not be liable for decisions or actions taken based on the data/information/opinions.
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Cash Weakens, Board Follows

Posted On: 12/07/2016

By Cassie Fish, http://cassandrafish.com

After yesterday’s head-fake CME cattle futures rally, futures are following today’s weaker cash trend and selling off. This morning’s FCE on-line auction saw prices from $109 to $112, the top equaling yesterday’s limited trade also at $112- $2-$3 lower than a week ago. Texas -where market-ready fed cattle supplies are the tightest and will stay that way until February- topped this morning’s trade.

Lallemand Micro-CellIn the meantime, packers have been able to pick up some inventory this week in Midwest auctions costing less than $110 to top off slaughter needs. There is growing talk that packers will run limited or no Saturday kills this month, taking the edge off inventory requirements. In fact, the next big Saturday kill won’t occur until January 7.

Yesterday’s futures rally seemed to be part of a “buy livestock futures” day, with lean hogs, feeder cattle and live cattle futures all above their respective 100-day moving averages simultaneously for the first time in months. There is growing technical enthusiasm for being long livestock futures and chart-based predictions for higher prices abound.  Hogs are experiencing impressive follow-through upside today.

Though lower, cattle futures are holding yesterday’s lows so far, and that chart point will prove to be pivotal for the rest of the week. Taking out that low will increase selling interest and a weekly close below the 100-day at any point will open a deluge of the same.

PrintIt will be the fundamentals the remainder of December that will set the tone for futures most likely, not the other way around. Boxes are topping and an $8-10 setback as the rib seasonally falls won’t surprise. Packers will be attempting to work cash prices lower between now and Christmas.

An arctic blast will hit much of the country next week that could provide a little support, or at least take the edge of record gains in feedyards as cattle use more calories to stay warm. At this point it doesn’t appear to be a significant market factor.

Beef features today were decent, staying in the mix with poultry and pork, but retail  prices appear to have leveled off, rather than aggressively declining to new lows for the year.

Copyright © 2016 The Beef Read. All rights reserved.
The Beef is published by Consolidated Beef Producers…for more info click here.
Disclaimer:  The Beef, CBP nor Cassie Fish shall not be liable for decisions or actions taken based on the data/information/opinions.
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Futures Consolidate; Cash Expected Lower

Posted On: 12/06/2016

By Cassie Fish, http://cassandrafish.com

CME live cattle futures are consolidating today, still holding the 100-day moving average while rumors of a cash trade in western Kansas by a hedger at $112, $2 lower than last week’s average price of $114 made the rounds. Other bids have surfaced at $110, $5 under last week’s top.

PrintLower cash this week would not be a surprise following the impressive cash cattle rally of late. Packers have purchased big numbers the last 4 weeks and a sizeable number with time. Still participation by all major packers is expected to continue and the cash pull-back ought to be a mild one when .

Combining larger inventories with slowing kills lessens packers needs some. Show lists yesterday were up in Kansas and Colorado and down in Texas where it’s known numbers are tight. Nebraska sold 10k fewer cattle last week than the prior week. Packers will be intent on regaining some of their lost margin between now and Christmas.

2016-12-06_chart1 2016-12-06_chart2

Boxes have their swan song this week as the rib gasps to its seasonal high, the primal printing yesterday $18 higher than a week ago. After this week, the retracement will begin. As illustrated by the Weekly Comprehensive cutout chart below, it’s been a modest cutout rally overall, compared to the up in cash cattle prices during the same time frame.

2016-12-06_chart3

There’s talk that retail features of rib roasts and hams chipped away at turkey sales this Thanksgiving with unsold frozen birds being shipped back suppliers- good news for the beef industry if true. Beef features are expected to stay solid through year end. It’s also a reminder, however, that outside of special occasions, there’s a large percentage of the beef carcass that must compete with cheaper poultry and pork retail prices.

Lots of attention is currently on the choice/select spread, pushing to new highs despite a record percentage of fed cattle grading choice and prime. While it’s true choice rib demand has been stellar, part of the issue here is the struggling grinding complex, (beef 90s made a new low for the year last week) since various cuts from select carcasses that make their way into the grind

2016-12-06_chart4

Copyright © 2016 The Beef Read. All rights reserved.
The Beef is published by Consolidated Beef Producers…for more info click here.
Disclaimer:  The Beef, CBP nor Cassie Fish shall not be liable for decisions or actions taken based on the data/information/opinions.
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Something New

Posted On: 12/05/2016

By Cassie Fish, http://cassandrafish.com

CME live cattle futures have traded both sides today following a downside correction that began late last week and finished with an outside week with a lower close after making a new high for the move. What’s new is that so far, live cattle contract months through Jun LC have held the 100-day moving average thus far. After providing iron-clad resistance for months, it is now offering support.

This current market correction is being viewed as normal, rather than wrought with fear and uncertainty, as was the case many times in the last couple of years. Whether warranted or not remains to be seen, but better packer competition, improved front-end currentness and the onset of winter weather are all contributing to a sense the cattle market has finally stabilized. Furthermore, the well-documented surge in beef production these past weeks has been met with active retail featuring and exceptional strength in the rib despite big supplies. Export demand has been terrific also and when combining these factors, there is a growing outlook the market is finally carving out a reasonable trading range.

This week’s expectations are wide-ranging on slaughter, from 600k to 612k. Some packers are rumored to be backing down hours as margins have contracted significantly. Beef sellers will try to squeeze a few more dollars from buyers this week, but the cutout is losing steam. Last week, the some grinding complex items declined with new lows for 2016 noted in 73s, 90s while the choice/select spread surged to new- even with record choice/prime production.  Ground beef must compete head-to-head with cheap pork and poultry, a tougher task than that of the highly-desired rib.

         Dec LC Struggling

PrintThe bear spreads are working today as Dec LC suffers. Last week, Dec LC filled a gap on the spot daily chart last week left on the last day of trading by Aug LC. Aug LC’s high that day was $113 and Dec LC stalled out at $112.25. Dec LC did manage to trade to the highest level it had traded since Aug 22, but the spot chart does provide an interesting perspective. After this week, it becomes seasonally more difficult for Dec to mount a rally and unless weather comes into play, Dec LC will begin to look ahead to second half of the month seasonal weakness.

The market will likely have to wait for Feb LC to take command in January to see if $113 can be bested and a check of the Aug spot high of $117.75 can occur.

Copyright © 2016 The Beef Read. All rights reserved.
The Beef is published by Consolidated Beef Producers…for more info click here.
Disclaimer:  The Beef, CBP nor Cassie Fish shall not be liable for decisions or actions taken based on the data/information/opinions.
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What Goes Up

Posted on:  12/02/2016

By Cassie Fish, http://cassandrafish.com

CME live cattle futures are down hard on the heels of reversing yesterday after making new highs for the move. Now lower on the week, most active Feb LC has held near key technical areas- $108.85, the close from 2 weeks ago; $108.62, last week’s low and the 100-day moving average, $107.70. Technical indicators have turned convincingly down.

Print

It’s been quite a 6-week run, $15.42 in Feb to be exact, and a correction post-Thanksgiving is more normal than not. The positive fundamental underpinnings are current feedyards in the south and the west. A less impressive factor is not-as-current feedyards from central Nebraska east into Iowa where showlists reportedly did not clean up 100% at the mostly $175 dressed level, quite a bit cheaper than other regions. Some are already calling cash fed cattle prices lower for next week. Carcass weights are stubbornly hanging in there, steers at 918 pounds for the period 2 weeks ago, were reported yesterday, unchanged from the prior week, still the second highest in history.

The cutout too has not been as strong as some had hoped and next week will likely top the rib. After posting an expected 613k this week, talk is already widespread that next week’s kill will be cut back to 600-605k as the kill begins to wind down into the holidays and lighter production should cushion the cutout decline somewhat. Focus has already shifted to what kind of recovery both the fed cattle prices and cutout values will have in January.

In the meantime, futures are headed lower, looking for support, which looks substantial for Feb LC in the $106.50 to $107 level. Of course, money flow heading into the end of the year could plow the market right on through that point. Half-way back of this rally for Feb is $105.50. Open interest has surged to the highest since last spring buoyed by managed money longs and cattle feeders laying off risk by adding shorts. It’s stating the obvious that there will be selling pressure as spec longs exit.

Copyright © 2016 The Beef Read. All rights reserved.
The Beef is published by Consolidated Beef Producers…for more info click here.
Disclaimer:  The Beef, CBP nor Cassie Fish shall not be liable for decisions or actions taken based on the data/information/opinions.
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New Month, New Highs

Posted on:  12/01/2016

By Cassie Fish, http://cassandrafish.com

CME live cattle futures responded to yesterday’s robust cash fed cattle negotiated trade by gapping higher and setting new highs for the move. Futures have returned to mid-August levels, just as cash prices have, topping yesterday at $115.50 as packers continue to scramble for inventory. The final big production push of 2016 lies just ahead and is driven by the need to meet active domestic and export beef demand.

Print

Spot Dec LC halted this morning at $112.25, $3.25 back of this week’s cash top. Of course, Dec LC expires 4 weeks from tomorrow, and seasonal weakness the second half of December is well documented- making the discount reasonable.

Although Dec is keeping a respectable distance from cash, the market overall still acts good even though overbought, holding gains and bull spreads performing. First notice day is Monday but there are no fears of delivery at this point.

The cash advance since mid-October of $18 is just shy $4.50 of the entire 12-week rally from mid-December 2015 to mid-March 2016. There is great speculation and even greater optimism that January will surpass the December top and minimally revisit the August swing high.

Clean up in feedyards in the western and southern feeding areas is reported to have been good to excellent. Eastern Nebraska and the rest of the Corn Belt have yet to fully trade with bids of $175 common this morning, which is the top end of last week’s range, being passed. Feedyards are not quite as current in this region and packer needs not as great. Thoughts are next week’s cash will trade fully steady as packers pull hard on contracts.

The Wall Street Journal weekly retail meat and poultry survey showed declines in all three categories, beef back down 4 cents to $4.59 per pound, near the low for the year, pork at $2.54 per pound, 30 cents lower than a week ago, and chicken at $1.55 per pound, down 6 cents from last week. These numbers speak for themselves, shoppers have lots of cheap choices.

The cheapest wholesale beef prices since 2011 have resulted in growing beef feature ad space and improved beef’s ability to compete against pork and poultry. Sub-$180 choice cutout prices in October also caught the attention of Asia, Canada and Mexico with shipments up significantly in November as proof.

Copyright © 2016 The Beef Read. All rights reserved.
The Beef is published by Consolidated Beef Producers…for more info click here.
Disclaimer:  The Beef, CBP nor Cassie Fish shall not be liable for decisions or actions taken based on the data/information/opinions.
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