The See Saw Continues

By Cassie Fish, CassandraFish.com

CME cattle futures continue to retrace this morning, following through after yesterday’s sell off and making a new low for this pull back, with the deferreds even taking out last Friday’s BOW_COMMERCIAL_PROTEIN_150x203_v2low. Yesterday’s higher opening was a rally to sell, at least short-term, with the over $15 discount carried by Jun LC certainly not limiting selling interest. A small positive, Apr LC keeps gaining on the deferreds despite being in the middle of the Goldman roll.

         Comprehensive Cutout Positive

Though old news and seemingly ignored, yesterday afternoon’s USDA weekly comprehensive boxed beef cutout and load count were generally positive, showing an increase in boxed beef sales in all but spot from the prior dismal week with an accompanying increase in price. The price chart shows that seasonally, there is typically more time before boxes retrace, even though some analysts say the market is out of steam.

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Even the much maligned export sales improved, almost reaching year ago levels. Given that total beef production, in spite of record heavy carcass weights, is still down 4.5% and slaughter is down 6.4%, both YTD, there is less beef to sell. This will continue to be the case until kill levels approach a year ago, which may not occur until June given tight supplies.

Illustrating the tight supplies was this week’s fed cattle showlist, down in all states, sharply and surprisingly in some. In fact, there’s talk that this week’s cash trade will be fully steady.

But none of the above fundamentals are providing much if any support to discounted cattle futures, which reached an overbought posture yesterday and have obediently retreated. Time is on the side of futures right now, allowing the discounts to remain mostly undisturbed as the same bearish outlook that has prevailed is still dominate. Bears are quick to remind Apr LC are trading May 1 cash prices.

         Panic Steps Aside for Trading Range

Still, the panic the gripped cattle futures trading during December, January and February has dissipated if not disappeared. Whether bears will admit it or not, the ease of which cash cattle prices rallied Friday was as impressive as it was unexpected.

The set-up is one in the same regardless of whether bullish or bearish. Either the discounts are justified or they are not. Feb LC proved the discount was unwarranted, albeit with less than a week to trade. If bullish, buying opportunities will continue to present themselves just as chasing rallies will be punished. If bearish, boldly selling the discount on rallies has yet to result in punishment, since most trades have moved to the second month before any lashing takes place.

The Beef is published by Consolidated Beef Producers…for more info click here.

Disclaimer:  The Beef, CBP nor Cassie Fish shall not be liable for decisions or actions taken based on the data/information/opinions.

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