Posted on Â 4/18/2017
By Cassie Fish, http://cassandrafish.com
Seasonally strong boxed beef market? Check. Plummeting carcass weights? Check. Larger slaughters scheduled? Check. Packer demand for fed cattle strong? Check.
It is all systems go for CME cattle futures as all contracts made new highs for the move and almost all made life-of-contract highs. Spot Apr LC took out the Feb LC high and has moved to the highest level since the market broke out to the downside in April 2016.
To add to the drama, LC futures, now in overbought territory, added another 5k to open interest yesterday, upping the anxiety that a top is imminent.
After an early session rally, futures sold off quickly over 100 points as traders held their collective breath. After taking an intra-day breather, futures have again begun to grind higher.
Most cattle traders have underestimated the power of the beef market this spring and the currentness level until just recently. But even as those two factors remain relevant, some insist the seasonally likelihood of a cash fed cattle top will occur- or has occurred regardless. When one combines the seasonal with big OI and overbought indicators, the cry for a top is resounding.
Â Â Â Â Â Â Â Â If It Werenâ€™t for Those Pesky Discounts
Futures, with their record wide discounts in 2017, seem to be finally growing tired of the boy crying wolf. The packing industry has aggressively blown through fed cattle supplies while the retailer and then the consumer, have snatched up beef for the last 6 months. The futures marketâ€™s cheap pricing was a barometer of fear more than anything else.
So, is it the top? Another short-term top could be in the making this week. The question is whether cash prices end up higher this week than anticipated, forcing the Apr LC over $128 or even to $130 before itâ€™s all said and done. Jun LC and the rest of the deferred contract months no longer seem as willing to ignore their discount as before. With so many traders counting on the wide basis, things could get interesting.