Too Cheap To Sell

Posted On: 05/17/2016

By Cassie Fish, http://cassandrafish.com

It may be the third week of May, but the big discounts in CME Live Cattle futures don’t present a tempting target for sellers, at least not today, as futures chop quietly around steady. Despite the seasonal predicting cash cattle prices will soon be heading lower, futures are reluctant to put more distance than $10 between themselves and last week’s $132 to $133 cash market. As a result, the board keeps bubbling up, getting higher on the day with Jun LC reasserting itself as leader.

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Spot boxed beef prices continue to surge higher, with prices near the April cutout high. Yesterday’s Comprehensive Boxed Beef report by the USDA showed another round of good sold-aheads as end users keep booking beef out front, spurred by attractive prices. Bigger sold-aheads mean less SKU’s are left to move in the spot window and they inspire keeping sizeable slaughters in the schedule. This week’s kill is estimated at 590k-600k, still an excellent pace and 20k-30k above a year ago. Seasonally of course, the rise in boxes will begin to flatten, but Memorial Day weekend and Father’s Day are still ahead.

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Technically, futures are hugging the 100-day MVA, well above Friday’s low but still unable to surge above $124.67-124.90 area, looming as resistance. Sooner or later, something will give way.

This prove-it-to-me market structure has proven to be impossible to shake. But as week after week of consecutive big kills, improving currentness, trimmer weights add up, extreme downside risk becomes less and less.
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