Posted On: 05/19/2016
By Cassie Fish, http://cassandrafish.com
The combination of weak commodity markets, responding to a stronger U.S. dollar as the global financial community anticipates a Â¼ of a point rate hike along with the belief that seasonal weakness in cash cattle prices is at hand were enough to swamp CME cattle futures today.
Corn, beans, gold- many markets are down hard to day so cattle are not alone. Though cattle act as if a limit-down move might be necessary. Once again selling the big discounts, despite improving fundamentals, was the right trade.
Futures demonstrated again this week the inability to sustain above the 100-day moving average, let alone make a run at recent highs and instead retreated below the 10-day before Jun LC took out last Fridayâ€™s lows- technically bearish.
Cash cattle traded in Kansas and Texas yesterday at $131-132- though not a lot lower than the prior week- it was interpreted as a sign of whatâ€™s to come- lower cash cattle prices as the market seeks its summer low. Quite a few cattle were sold â€œwith timeâ€. This $10 basis feels like it is set in cement and could be with the market for some time to come. The north has traded only a few cattle $206-208, lower than last week too. The fact that there arenâ€™t many cattle behind whatâ€™s on the showlist is irrelevant to futures but will likely keep packers engaged, especially in the face of lower cattle yields, grade and weights.
Though it is obviously not a futures market factor, talk is boxes will hold together until mid-next week, extending their incredible rally and exceeding most expectations. This feat accomplished on the biggest kills since June 2014. Impressive.
Also impressive are Q2 packer margins, mid-way through and exceeding expectations as well.
Retailers still seem reluctant to pass on savings on beef to consumers as the Wall Street Journalâ€™s survey showed the average price this week rising from $4.84 to $5.04 per pound, still down from $5.31 a year ago. Pork prices rose also while chicken won the â€œcheap protein contestâ€, averaging $1.69 per pound, down $0.08.
Cattle carcass weight data will be out later this morning, showing weights declining; however, that news is not likely to influence the money flow on this â€œsell commoditiesâ€ day.