Futures Weakness Drags On

By Cassie Fish, http://cassandrafish.com

CME cattle futures obviously aren’t done going down yet as last week’s lows are revisited and Apr LC makes a new low for the move. Technically the market is very oversold, but another round of long liquidation and maybe some nervous short hedging is pushing the market lower nonetheless.

         Not All Bad

The beef news yesterday was good, despite the board action, with the cutout printing higher and USDA’s Comprehensive cutout report showing excellent exports and good out front sales with prices barely weaker for the week.

2016-03-29_Chart1

2016-03-29_Chart2

2016-03-29_Chart3

2016-03-29_Chart4

         Kill Revised Down

A problem at a plant late last week and another dark plant yesterday resulted in last week’s kill being cut 7k head, coming in at 540k, down 5k from the prior week, a disappointment. This week’s slaughter is still expected to be 540k-545k. There’s already talk of cooler cleaning at two plants next week in the north as packers get ready for much bigger kills in May and June. Packers continue to do a masterful job of matching throughput to supply and demand and margins, looking at the comprehensive cutout and $3 lower cash last week- are still solidly black.

         Small Negotiated Trade Too

Fed cattle supplies are seasonally snug, though cleanup last week, with only a 61k head negotiated trade, wasn’t great. Packers are expected to use April contracts where they are most needed regionally to fill holes and lessen the need to compete for negotiated inventory.

         Steady?

Still, when this week’s cards are placed on the table, made up of decent packer margins, a bottomed chuck and round market bolstering the beef cutout- cash prices could just as easily end up steady this week as not. After all, packers likely need to buy a few more cattle this week than last and it’s still another 6-8 weeks or so before fed supplies begin to creep up.

It is hard to put an exact finger on just why the discounted futures market acts as badly as it does given the fundamental outlook for the next few weeks. Nevertheless, some catalyst will come along to justify another rally; perhaps back towards the top of the trading range this market is finding itself in this year.

Copyright © 2016 The Beef Read. All rights reserved.
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.
Please follow and like us: