Posted on: Â 8/26/2016
By Cassie Fish, http://cassandrafish.com
The oversold cattle futures market is still in its slow motion decline, very possibly on its way to testing or even making new life-of-contract lows. On the meek morning rally, Oct LC today couldnâ€™t take out last weekâ€™s low of $109.65, let alone challenge last Fridayâ€™s close of $110.25. Currently that puts Oct about 312 points lower on the week. Of the last 13 trading days, Oct has closed lower 12 times. Today will be the 13th.
A decent number of cash cattle traded for 3-week out delivery yesterday afternoon at $178 dressed to a major packer, $6 lower than this weekâ€™s top dressed cash trade, illustrating how the market keeps moving away from the seller. Clean up this week doesnâ€™t appear to be great.
The one piece of good news released yesterday, steer weights down 13 pounds from a year ago, may have lessened fears of another fall wreck for analysts but so far, itâ€™s had zero positive influence on futures or cash prices.
Todayâ€™s action wreaks of capitulation. But next week is a â€œlong week buying for a short weekâ€ for packers and at this point, a steady cash go next week would be a victory. The potential for a new low for the year in cash prices next week feels very real today, as futures fall. Feeder cattle futures have been hit pretty hard the last couple of days as the realization that cattle feeders must buy cattle cheaper if they have a prayer of surviving more economic pressure.
Thereâ€™s really nothing new. How much lower the market may or may not go at this juncture is impossible to say. With packer competition limited if not seemingly extinct, emotion in the form of fear is the driver. The sense of powerlessness being experienced by the cattle feeder is dominant.
The packer is simply buying a few then backing up, keeping kills big and making money. On the positive side, excellent beef features for Labor Day weekend are anticipated and the hope of big clearance to the consumer is high. But the numerous choices of cheap protein keep the victories for retail beef sales modest and hard-fought, a theme that wonâ€™t change, especially in light of feed prices.