Posted On: 06/28/2016
By Cassie Fish, http://cassandrafish.com
There are widespread expectations that fed negotiated cash cattle prices this week will trade higher, as much as $2-7 depending on who you asked. With packer margins record wide and last week’s kill revised up to 611k, packers are expected to pay up to keep production rolling. This week’s slaughter level is estimated at 605-615k.
Comprehensive Confirms Boxes Moving
The USDA Comprehensive Boxed Beef report released yesterday afternoon confirmed that movement of beef has been excellent. Last week’s spot volume was the second highest for the year as end users filled in inventory which is obviously clearing to the consumer at a brisker pace than in a couple of years, thanks to much cheaper retail prices.
Seasonal Weakness Still in Store
Of course, post Fourth of July, the cutout will experience its normal seasonal weakness and continue the decline already underway. Depending on what happens to margins and movement in July, weekly kills could be ratcheted back somewhat from current robust levels.
CME Cattle Continue Rally
It is the anticipation of those very fundamental developments that is keeping most Aug LC cattle futures under wraps. Aug staged an almost $5 rally last week and currently are but 122 points off that high.
Technically, CME cattle futures volume has been extremely light for days and today’s rally is taking futures back to where the market was trading the pre-Brexit-vote break last Friday. There are various technical obstacles for Aug between last week’s high of $114.22 and the 40-day moving average of $115.98. Perhaps higher than expected cash cattle prices this week will be impetus enough to spark a 200-300 point additional rally from here despite the bearish seasonal undertow.