Quietly Waiting as Futures Reflect Optimism

By Cassie Fish, http://cassandrafish.com

So far, CME cattle futures have traded mostly higher in quiet trade, making new highs for the week with little fanfare before backing off. In the country, negotiated cash cattle bids, consistent with yesterday have been renewed and everyone is awaiting the cash trade to begin, feeders obviously holding out for more money, after losing a little last week from the prior week’s trade. At this juncture, $108, steady with last week would be a disappointment and $109 to $110 a victory for bulls.

Bears are insisting this rally can’t sustain, saying choice boxes, which have rallied $6.85 since bottoming a couple of weeks ago could set back a few dollars before resuming the seasonal uptrend. There’s also plenty of conversation that fed cattle supplies are still ample and packers don’t need many. The bear camp is set on cash trading steady this week late this afternoon. And despite carcass weights coming in steady yesterday with the prior week, bears insist there are plenty of big cattle around.

On the heels of the biggest fed kill of the year, this week and next will see reduced fed cattle slaughter production as various companies perform maintenance. The kill this and next will range between 630k-635k. This kill cutback could provide some support for boxes. Plus, seasonally slaughter levels will decline gradually in Q4 relative to Q3.

Whatever the various commentary circulating, the market’s momentum has subtly shifted and it appears normal, methodical Q4 seasonal price improvement is underway. The rib primal certainly got the memo as it has gained over $40 off its low. The chuck primal, which has been the stalwart for weeks, appears to have finally topped.

On the technical side, most active Dec LC has posted an outside week and looks to close higher on the week, up about 100 points from last Friday’s close currently. Certainly, managed fund traders, less influenced by fundamentals, would have to like this week’s futures action. Dec is also finally gaining some ground on Feb and Apr LC today, as the back months begin to slightly cool off their torrid run of late.

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