By Cassie Fish, http://cassandrafish.com
The technical performance of Oct LC this week has been horrible. An outside week with a highly likely lower close after failing at key technical overhead resistance- this week’s action has left no question that a bottom is not in sight.
Oct has retraced to the high it made last January of $104.47. Now that it’s September, Oct will be pelted by rollover for the next 2 weeks. Since it’s trading par to cash and there is no reason to believe that next week’s cash price will be any better than steady, the near-term outlook is grim for bulls.
The anticipation of worsening fundamental news in September and October consistently fuels the fire of the decline. There is an abundance of talk about more-than-ample fed cattle supplies in Texas for September, yet formula numbers are supposed to drop- a puzzle. Cattle are reportedly being hauled north to Kansas to die and that is expected to increase. The labor-restricted fed kill capacity concern is the noise dominating the background of all thoughts and conversations. How much is fear-mongering and how much is fact matters little, if at all, until this market has exhausted itself on the down.
Why did the market bottom October 13, 2016? What made that day, ‘the’ day? Some cattle market bottoms have been memorable. Others have not. What is true is anticipation many times has a greater impact than reality itself. Will the industry lose currentness in September heading into fall as cattle weights seasonally increase? Are the numbers really there in Iowa and eastern Nebraska this year?
No way to know until more time goes by.
The cattle feeding industry did a great job getting current and staying current in 2017. Beef demand has grown all year, domestic and export. Packers have run the most +500 weekly fed slaughters since 2013, after adding some staff and picking up line speeds. And up until August, cattle feeders had a profitable year. But now the losses, premium board and lousy swap for replacements have eclipsed the memory of all that went right in 2017. Relief that things went better than expected has been replaced by dread that last year’s Q4 lows won’t hold.