Futures Hold; Cash Standoff

By Cassie Fish, http://cassandrafish.com

The decisive basis shift of Oct LC this week, high-priced replacement costs and unprofitable market-ready fed cattle have combined to give cattle feeders back bone this week. CME cattle futures have held yesterday’s gains so far, which has insured the packer bids- below last week’s price- are being ignored.

Cash bids in the north are $163, figured live about $103 while in the south where there is reported to be more-than-ample numbers, bids range from $100 to $102. If the market is steady with last week, that would be considered a win for feeders.

The fear among cattle feeders, so palpable much of August has been replaced by hope. The hope is being provided by growing premiums from Dec LC through 2018 futures contracts.

Experienced cattle traders know it’s fall and with fall comes heavier carcass weights, more yield grade 4s and 5s. September beef production will exceed a year ago and might top August except for less kill days. But that’s something to worry about later, not today.

This week proved to be the week to draw the line in the sand for producers, and draw it they have. If the negotiated trade the last couple of weeks had been bigger than it was, then packers could be more complacent. But it wasn’t, so perhaps they can’t, at least not all of them. That is the bet the cattle feeder is making and futures seem convinced that bet will be a winner.

After all, packers are profitable and have orders to fill. It’s the last month of the quarter, so the incentive is there to run volume and bank sales realizations. The market appears to have finally stabilized. The larger question, as to how much upside can actually be realized remains to be answered in the coming weeks.

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