Big String Trades Steady; Futures Continue Weakness

A short bought packer paid $164, fully steady for 4000-5000 head yesterday in Nebraska for quick delivery. Instead of providing support to CME Live Cattle Futures, August LC only took out the prior session’s high by a nickel and this morning has already taken out that same session’s low, likely resulting in an outside day with a lower close today.

Other than the big trade by one astute cattle feeder, the rest of cattle feeding country is too quiet this week, as packers pull hard on contracts and other committed cattle in order to stay out of what’s been a competitive negotiated cash market.

This is all disappointing action for bulls, since the huge discount to cash that August fearlessly carries coupled with a steady trade yesterday does nothing to dislodge shorts.  The shorts it seems are convinced cash will be lower the last day of trading and they are willing to wait their turn.

         Boxed Beef Prices Correct

Finally, also as the bears have been predicting for weeks, the USDA boxed beef cutout values are declining, the choice about a buck lower than a week ago and the select down a whopping $5. It’s worth noting we currently have a record number of cattle grading choice, 66.6% the most recent statistic, 4.6% over a year ago. So we are taking more money away from a small percentage of the kill.

We get updated cattle weight data today, and bears expect to see carcass weights climbs as evidence of the much talked about feeding-cattle-to-heavier-weights is borne out.

         Fear of Growing September Fed Supplies

This is the market’s current obsession and perhaps is the explanation of why packer behavior has changed. August seems to be the transition month from “not enough” to “plenty”. And this market with its reluctant-type rally seems more than ready to embrace any bearish philosophy presented. So we won’t know until we get to September whether “plenty” exists or not. But this market will assume the bearish rationale until forced to accept an alternative.

         Technicals Look Bearish

​What’s dominating today, with the big down, are the technicals and fear bearish ideas might be right. Sell first; ask questions later is today’s mantra. Most active Oct LC has taken out last week’s low and now traded below the 40 day moving average for the first time since April. Aug LC has yet to take out the very critical point of $155.35. So far, Aug LC has an inside week going, making the rest of this week a very important one from a technical perspective.

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Disclaimer:  The Beef/CBP shall not be liable for decisions or actions taken based on the data/information/opinions.
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