Cash Surges; Futures Pop

Posted On:  06/06/2016

By Cassie Fish, http://cassandrafish.com

Friday’s late afternoon cash cattle trade did not disappoint. Cattle sold higher to sharply higher and many cattle have already shipped to start production this morning. Packers competed hard to fill needs, especially in Nebraska, Iowa and Colorado, where prices pushed to $130 to $132.50.

Thanks to a stellar performance by the choice rib and choice loin, the choice boxed beef price ended the week less than a buck lower. Indeed, early June is the “heart of the watermelon” of choice and prime steak demand and indications of good movement to the consumer abound and wholesale supplies of the same are tight. This same tightness ought to translate to a fully steady go for the choice cutout this week with Father’s Day still a couple of weeks out ahead.

Talk for this week’s kill run from 580k to 600k. The last couple of weeks have come in a little less than estimated with last week’s 520k 10k short of most expectations.

2016-06-06_Chart1

2016-06-06_Chart2

Past mid-June, seasonal weakness will likely develop on the middle meats and the entire cutout will begin its move to a summer low, typically found in July. The magnitude of that break will be critical.

     CME Cattle Futures- Now or Later?

CME cattle futures seem to have a foot in both worlds today, posting a nice rally out the gate this morning in response to Friday’s cash cattle price surge. Finally, Jun LC and Aug as well both poked above the ironclad 100-day moving average and breathed the air today. Neither had been above the 100-day since May 18. Last month, futures hung around the 100-day for a week a half before succumbing to another sell-off. Traders are all wondering if this time is different and the market is ready to sustain the uptrend rather than fizzling out.

PrintFundamentally, the cattle industry is more current than a month ago. Kills have stayed elevated, beef demand has been good and weights have dropped below a year ago. However, is all this enough to escape the seasonal summer sell-off that futures stubbornly are predicting with their discount? Futures are not convinced and have given back some early gains, with feeders going red, as they eye the continuation of a corn and soybean rally.
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