By Cassie Fish, http://cassandrafish.com
A very few cattle traded yesterday in the Corn Belt, mostly $120-121, a little softer than last week while the $119 bids that surfaced in the south were disregarded. Despite early week optimism, this week’s negotiated cash fed cattle trade is shaping up to be a little lower rather than the fully steady hoped for.
Widespread talk of a 580-585k kill next week is a signal packers are willing to manage their throughput carefully. Plant margins are still positive even after paying up last week for cash cattle though have undoubtedly narrowed from the recent record levels. The cutout will hold together decently this week boosted by the holiday-shortened kill and brisk fill-in business before slipping $3-5 next week.
CME cattle futures have resumed a downtrend though lots of analysts still expect contract lows made in June to hold with the idea that enough bad news is already priced by the discount. The fact that many have felt that way for weeks and months, yet the futures market has continued to disappoint all but bears remains in the forefront of most if not all cattle traders’ minds. Picking bottoms up to this point in 2016 has simply not worked for more than a few days or a couple of weeks at a time.
CME cattle futures do look technically defensive after selling off yesterday but so far are holding above the impressive tail left after Tuesday’s rally. If Tuesday’s lows are violated, the downtrend will likely accelerate. If not, that could signal a basis change is near. If somehow the market found the impetus for a push to new highs this week, though unlikely, that would go a long way to bolster confidence for what is shaping up to be an anxious month for cattle bulls.
Feeders are giving back a little ground against fats today now that the battered corn market has finally come up for air posting gains today. If LC futures fail, it will be challenging for FC to ignore it completely.
July is setting up to be a pivotal month.