Cash Trade Trickles at Steady; Futures Try a Bit of Green

By Cassie Fish, http://cassandrafish.com

It’s Day 4 of CME cattle futures trying their hand at a technical correction from its oversold status. Hovering just under multiple moving averages and a little more than 100 points off last week’s lows, this rally could define the word modest. This cluster of moving averages was surpassed briefly yesterday morning for less than an hour but have been impenetrable so far today.

The fed cattle trade occurring all week in dribs and drabs at $126, steady with some that traded last week and 0.76 below last week’s average, doesn’t seem to be helping matters much. Nor is the obviousness that packers are intent on replenishing inventories because of brisk beef demand and fat margins.

Since topping 3 weeks ago (though it seems much longer) at $129.75 average, the market has posted a $127.95, then last week’s $126.76. Bids of $126 are common in Texas, Kansas and Nebraska today. Even some $204 was paid in central Nebraska. Maybe $127 trades will occur since market-ready fed cattle supplies are tight. But the real take-away here is the market believes cash will erode lower from now on. The only disagreement is about how quickly and how much.

That belief has cast a dominating sense of limitation over this market, be it futures or cash. More cattle are coming in 5-6 weeks. Kills in May and June will need to push weekly levels not seen since 2011. That has become this market’s focus.

Because the backdrop of this market’s fundamentals are still positive, surprise strength can surface at any time. It’s still a long time until the calf-feds hit the market in the middle of Q2. That’s what makes this market so challenging. But as the weeks go by, the drive to get ahead of the coming supply increase and price decline will only increase.

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