By Cassie Fish, http://cassandrafish.com
At the tail end of another week and with the prospect of higher fed cattle prices yet again, CME cattle futures continue to carve out new highs for the move in a methodical manner. It’s been 9 trading days since the market bottomed, and the technical indicators are becoming more overstretched. Even if futures are just heading back to the top of their trading range, buoyed by strong cash cattle prices and robust protein demand, that doesn’t lessen the impressiveness of this move.
Today, Apr LC is in the lead, very possibly attracting some managed fund buying. The cheapest U.S. dollar in 3 years and a mega-wide spread between commodity and equity values is bound to attract some interest. This is already evident in metals, energy and one could argue, even beginning in grain and oilseeds. Open interest continues to build on the up.
In the country, packers remain fairly quiet, as the only conversation is about how much higher cash will be, rather than will it be higher. Most expect prices to be minimally $2-3 higher, but more is not out of the question.
With choice boxes back to $208, only $6 below the Q4 high and black packer margins, Saturday’s slaughter may come in at 50k as packers attempt to make up for Monday’s lost time due to the blizzard. That could push the weekly kill above 600k, more than enough for the industry to maintain its current front-end status.
If the kill does reach 600k or more, it is powerful proof that the health of and wealth distributed throughout the supply chain -which supported 2017 prices at a higher level than anyone expected, despite an increase in production- is intact and still driving this market.