By Cassie Fish, http://cassandrafish.com
Last week’s national negotiated cash cattle trade totaled 165k head, the second highest of 2018. Cash prices increased $2 live as packers competed to once again replenish inventories during this time of ample cattle supplies overall but fewer captive numbers.
If the recent pattern is to continue, packers may once again attempt to leverage their regained inventory position to break cash cattle prices again this week. That strategy may work but what is becoming increasingly clear as the summer wears on, is that the seasonal low was made in June at $106 and the market is unlikely to spend much time, if any, below $110 going forward.
Iowa especially traded more cattle than any other state last week at 52k head, so that ought to quiet some concerns about that state beginning to backlog cattle.
Last week’s 624k head kill was the smallest since April and a bit of a surprise. This week’s is estimated from 635-640k head. Boxed beef prices are expected to work higher this week and next.
Negotiated cash cattle prices nationally averaged just under $113 for the third time in July, something most traders did not expect. This fact continues to support spot Aug LC, which continues to gain on the spreads. The Aug/Oct is into $1, the narrowest since mid-March.
Aug LC today reached $111.10, the highest level since the market broke out to the downside on March 15. Right now, Aug LC is trading a little lower, so has a hook down going but the market is not overbought, and with 20 trading days left counting this one, time for additional upside is plenty.
All in all, cash seems to be in a big trading range while Aug and Oct LC examine being too cheap relative to cash. Throw in a modest seasonal boxed beef rally and it appears bears looking for a big futures break may have to wait.
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