Country Trade Starts

Posted on:  5/18/2017

By Cassie Fish, http://cassandrafish.com

This week’s negotiated cash trade has picked up today in the south, with a little trade at $133, followed by a $133.50 bid- then $134- all within the range of yesterday’s FCE auction. The CME cattle futures rally the last couple of days had given some hope that $135 and with three packers bidding at $134, that may come to pass.

Trade volume in the north this week has been greater and between $212 to $215 and bids have surfaced at $212 by two majors. No doubt that basis continues to be a powerful incentive and the balancing act between selling cattle or holding out for more money continues.

Packers are intent on stepping the cash cattle market down but are keenly aware that carcass weights and a very current front-end of market-ready fed cattle supplies make their task not without challenge. Packers know they must continue to replenish inventory each week in order to maintain leverage required for an orderly decline. The tug of the basis and bearish market psychology will help their cause but it will be 4-6 weeks before front-end fed cattle supplies ease enough to make a material difference in week-to-week purchases.

The tail-end of all those big sold-aheads are in shipment mode for another 3-4 weeks and packers are keen to fill orders and ring revenues.

But as is the way of this business, the demand picture beyond mid-June is dramatically different than that of the last several months also, and packers are re-considering June slaughter schedules, dialing them back lightly, to attempt to sync up the still tight fed cattle supplies with slowing out-front demand.

Packer margins are black, though not as black as spot values would indicate, since only about 25-30% of beef traded is in the spot market.

CME cattle futures have spent the day between Tuesday’s low and Wednesday’s high, making it clear that a move below or above either one would spark some follow-through. Futures are not grossly oversold yet, but have broken enough that shorts are nervous and are banking some profits. The more significant overhead resistance resides at the 10-day moving average and Monday’s high.
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