Holding Together

By Cassie Fish, http://cassandrafish.com

CME cattle futures are holding yesterday’s gains, well above the monster gap left by Monday’s powerfully higher opening. Prospects of cash prices this week trading fully steady to possibly as much as $3 higher are keeping selling limited and optimism up. Boxed beef prices gained sharply yesterday and will all week.

Print

Yesterday’s futures volume was big- 95k and OI dropped hard, indicating shorts ran for cover. Today, the bull spreads are still working, though not as dramatically as yesterday as the market once again moves back into the middle of the trading range, now in its 6th month.

Technically futures have run into some resistance now and need to close above the April monthly highs to really
catch fire. The daily technical indicators have moved into overbought territory but the weekly gauges are beginning to strongly suggest a bottom, not what many have in the cards fundamentally. After reaching the lowest spot price since May 2012, the spot weekly live cattle chart, for now anyway, has left an island bottom.

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Big volume wasn’t reserved just for futures trading as last week saw 116k negotiated cattle trade last week, the second largest volume of 2016. Boxed beef spot volume surged as well, the largest of 2016 and traded at the lowest price of 2016. The sold-ahead beef position is also said to be excellent.

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Last week the market got confirmation that carcass weights are finally dropping and now grading data indicates that indeed, fed cattle are becoming more current.

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Fundamental confirmation of the much-discussed tightening supply of market-ready fed cattle ought to support cash prices in the upper $120s to mid-$130s for the next few weeks at least. There will be more June contract cattle than in May, which may help the packers fill holes, but that is 4 weeks away.

Big kills, better beef demand, positive packer margins have aided the industry in cleaning up the front-end in a way not seen in quite some time. Let’s see where it takes us.

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