Posted on: 01/03/2017
By Cassie Fish, http://cassandrafish.com
It may be a new day, month and year, but CME cattle futures are continuing the technical correction began last Friday. So far, the market has done nothing more than consolidate, but there are technical predictions Feb LC could break another 200 to 400 points, depending who you ask.
Fundamentally the market is on solid footing. Last week’s 507k kill again exceeded estimates of many and this week’s guesses range from 528k to 545k. Given the positive packer profit margin, likely closer to $100/per head than $50/head, a 545k is probable if not higher, depending entirely on this Saturday’s kill size.
Boxed beef values ended up $5 higher last week and are expected to increase again this week. The big story last week was the strong grinding complex, some items back to, or above the 5-year average for the first time in a long time. The rib, on the other hand, is still in a massive seasonal downward correction, after exceeding upside expectations in early December. The level of fill-in business will be watched carefully this week, the first normal post-holiday test.
Fed cattle trade this week is being called steady at best by most and an increase in showlists in Texas, Kansas and Colorado support that idea. Packers are also pulling on contracts to fill kills. One thing that has changed is market-ready fed cattle supplies in the north- Nebraska, Iowa and even Illinois, South Dakota and southern Minnesota have finally tightened and the discount carried for months has mostly evaporated. This is likely to lend some market support.
Also, expected to lend support will be the typical larger January kills beginning next week and continuing until February. Resuming normal work schedules and filling out the supply chain and retail meat case mix tends to be price supportive most every January and given the huge Q4 2016 production levels relative to recent years, the rekindled interest in beef is expected to continue in Q1. Thus, moving hams and turkeys out and getting and keeping beef in the stores will occur and ground beef features especially are anticipated this month.