Posted On: 6/30/2016
By Cassie Fish, http://cassandrafish.com
Just in time for Fourth of July fireworks, short-bought packers are upping cash bids on a Thursday. As portended by strong CME cattle futures all week, cash bids are surfacing at $195 dressed in Nebraska, $5 higher than the top dressed price paid last week and $6 above last week’s average dressed price. Bids in Kansas of “will call at $118” have also been made.
Every major packer has bid today in major cattle feeding states. There is something to be said for packer competition. The more packers competing for inventory, the stronger price, especially when big kills and record margins have left inventory depleted. Forward contracts for July have been scheduled but packers still need to replenish their stores. Brisk sold aheads for the first half of July need beef to ship to satisfy commitments.
Undoubtedly record margins and good to excellent retail beef features have spurred +600k kills since Memorial Day week, and the result is a more current front-end cattle supply and cattle feeders attempting to wrench back leverage. Cash could end up dollars higher than last week’s low for 2016 as packers are forced to pay up or do without.
While things heat up in the cash- and trade sharply higher appears likely- CME cattle futures have halted their ascent against overhead resistance, yet to break out. Well into an upside correction begun a week ago Monday, and still comfortable trading discount, futures are faced with the upcoming roll and weaker July seasonal.
Futures anticipated higher cash this week, but at least at this moment, don’t seem comfortable with idea of a basis change. Perhaps it is a buy the rumor sell the fact trade. Perhaps not. It is tough to have a lot of confidence in cattle futures after the last couple of years. Dwindling volume and open interest certainly confirm that is the case.