Cash Catches

Posted On:  06/23/2016

By Cassie Fish, http://cassandrafish.com

The pendulum is swinging the other way today for a change, with packers upping bids as profitability and desire to run more hours inspires paying up a little. Bids $2-4 higher from $188 to $190 have been picked up in eastern Nebraska and $117-118 might not be out of the question in Texas after $116 trades earlier in the week.

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CME cattle futures have acted good all day and Aug LC is trading a little higher on the week. There is a technical correction underway and daily stochastics indicate there is more room on the upside. However, it is sobering to look at what it would take to really alter the big picture outlook, and that would be a close above last week’s high of $117.60. The 40-day stands at $116.02 and overcoming that hurdle would be a first step if something more than another rally in this bear market is underway.

The desire to kill over 600k relative to available fed supply appears to have floored cash cattle for now. Greater downside risk exists in July when beef cutout values decline more sharply seasonally and packers may be less eager to give up a little margin to run more hours. The degree of the July cutout break will be especially paramount this year. So far, the middles have out-performed expectations as consumers snatch up good beef features. However, post July 4th is a very strong seasonal for a shift away from middles to the hot dog and hamburger dominate, “dog days” of summer.

Today’s improvement in cash bids and triple digit futures gains have cattle feeders feeling more optimistic than in three weeks. History tells us that a lower cash low is likely yet to come second half of July while the ultra-cheap price level reached this week in live cattle futures give hope that at least futures got low enough. Time will tell.

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