Much Ado?

Posted On:  06/24/2016

By Cassie Fish, http://cassandrafish.com

The surprise vote by Great Britain to leave the EU that has swamped global markets this morning has not left CME cattle futures unscathed, but the cattle market has rallied back some periodically as the morning has worn on. Not bold enough to shrug off today’s tempest, cattle have still avoided locking limit down.

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Today’s financial turmoil has given the packers a reason to play it cool and two major packer have stayed on a $186 bid in eastern Nebraska while the only aggressive regional packer paid a little $190 and is now bidding $188.

Cattle feeders that haven’t sold yet are counting on the packers willingness to pay up to fill big kills, inspired by record margins that have been aided by the beef cutouts slower-than-normal seasonal decline. Choice boxes are $12.88 off their high two weeks ago and many analysts are predicting the market will lose another $10 before bottoming in July.

The market is also awaiting the release of USDA’s monthly Cattle-on-Feed report, where expected big May placements seem to be already priced. A surprise here is not anticipated. Today’s Cold Storage report is expected to show continued progress in normalizing beef stocks post reducing the glut carried into early 2016 due to last year’s hoarding.

Next week the packer will be buying for a short kill week. Contracted cattle will likely be relied on heavily the first half of July in order for the packer to continue to keep the negotiated price under pressure. There has been an increase in analysts this week hinting that a bottom is finally near in the extremely beleaguered cattle market- likely in the next month- with some even willing to say futures may have already turned the corner.

This rebirth in optimism has also been evident in cash feeder cattle sales this week where some cattle feeders have paid prices that put breakevens in some cases a $5-10/cwt loss again live cattle futures prices. It is interesting to ponder why cattle feeders, after two turns of fed cattle losses, feel such urgency to pay up for feeders when hundreds of thousands more feeder cattle remain outside feedyards than a year ago.
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