By Cassie Fish, http://cassandrafish.com
There is talk but little action today in the negotiated cash cattle market. No serious bids have surfaced following last week’s dollars-higher cash trade on big volume. The packers aren’t likely as short as a week ago and with small hour cuts possibly being made for later in May, the packer is making an attempt to slow the market tempo down. Still, cattle are scarcer and greener and the packer is profitable.
Discount CME cattle futures are stronger today, but have yet to break out and test the overhead resistance, in Jun LC from $125-126. Now that futures have edged into overbought territory and the shorts that wanted out have blown, new longs are reluctant to follow. It has proven to be a bit dangerous at times, initiating new positions in the middle of cattle’s trading range. With one eye on the rocket-ship boxed beef market and the other on futures discount to cash, selling the market here for a trade could just as easily be a mistake.
Prognostications by some for a probable seasonal decline in fed cattle prices beginning next week made the rounds yesterday, and may have upped the confidence that this rally, like so many others, will fall short. History would say so. It is also just as true that the placement pattern against May/June and the big 2016 kills may well have combined to have gotten feedyards in a more current state than in years. Meaning the weight data released on Thursday will continue to inform this market and carry a great deal of impact, especially if and when weights drop under year ago levels.
Adding to the “maybe this was all we’re going to get” theme being tossed around, some packers are hinting that boxes will top this week, though the cutout usually holds together until week after next. The rib is still a fantastic value, dramatically cheaper than the last two years, and more upside there would keep the cutout rally underway. It seems a bit early to write off the beef market when the heart of the grilling season lay just before the market and the consumer hasn’t yet had the opportunity to clear the shelves. Let’s don’t forget that retail beef prices will also be the cheapest advertised for grilling season in a long, long time.