By Cassie Fish, CassandraFish.com
CME Cattle Futures are generally 450 to 550 points higher than last Friday, grinding methodically higher, defying gravity and even many bullish expectations. As Live Cattle futures approach $170, some analysts are predicting the major top is near, others want to buy a break and traders whoâ€™ve been long are plagued with temptation to take profits.
Â Â Â Â Â Â Â Â Fat Cattle Auctions Hot
If the fat cattle sale in Worthing, South Dakota, the most northern CME delivery point was any indication yesterday, competition for available fed cattle numbers in a public forum was nothing short of fierce.
To quote USDA report yesterday afternoon, â€œCompared to last week:Â Slaughter steers were 5.00 to 7.00 higher, heifers mostly 4.00 to 6.00 higher with instance to 7.00 higher.Â Holstein steers 7.00 to 8.00 higher.Â Very good demand with a very active market.Â Packer buyers and two-way buyers were all trying to get cattle bought today. Ten loads of steers, three loads of heifers, along with several part loads and smaller packages of steers, heifers and Holsteins. Â Â Â Steers:Â Choice 2-4 1448-1504 lbs 160.00-163.10, 1530-1664 lbs 159.00-162.50.Â Returning to the Country:Â Choice 2-3 1345-1392 lbs 164.00-165.25; Qualifying for Natural Beef load 1373 lbs 167.60. Select and Choice 2-3 1141-1316 lbs 166.00-168.50; Qualifying for Natural Beef pkg 1173 lbs 169.75.â€
During the last few years, as the negotiated fed cattle trade becomes smaller and occurs usually in a half day at the most, market watchers have turned to the old school fed cattle auctions as an indication of how cash will ultimately trade. Most major packers send a buyer to these sales and many times these cattle end up being some of the cheaper cattle that a packer will buy.
But the promise of the biggest corn crop in history this fall bringing the cheapest corn prices in 4 years and sky-high feeder cattle prices have altered the dynamics in these sales, as 2-way cattle, cattle that could go to the packer or back on feed, become more prevalent with each passing week. Regional cattle feeders are buying cattle at sales weighing under 1400 pounds and putting them back on feed. CME delivery specifications allow cattle weighing up to 1500 pounds with no discount. And even though the volume of cattle going back on feed is small compared to the number of cattle turned into packers each week, the dynamic occurring is instructive. Futures are premium, corn is cheap and the market is successfully incentivizing the creation of needed beef tonnage for Q4 2014 and Q1 2015.
Â Â Â Â Â Â Â Â Fourth Quarter Beef Production
According to our calculations, and compensating for heavier carcass weights, Q4 beef production is expected to be down 2.8% from 2013 levels, which was down 2.2% from 2012. Thatâ€™s a projected 6.159 billion pounds, the lowest since 2005 and Q1 2015 is projected at 5.740 billion pounds, down 0.8% from the excruciatingly small Q1 2014 production.
Adding pounds and pushing cattle into November seems to be the markets mission today, and that is bullish Oct LC. Perhaps enough to take Oct LC even to Dec LC.