A Void of Good News

By Cassie Fish, http://cassandrafish.com

The first half of October has been absent of good news and CME cattle futures have responded by selling off. Market action is negative, charts look lousy as the futures market clearly ran out of patience.

The futures market’s weakness has been a reaction to the lethargy of the cash cattle and boxed beef market, stagnate in the same price area for multiple weeks. Futures rallied big in early September and in fact, September prices for both cash cattle and boxed beef averaged significantly over a year ago. But the failure of the cash market to gain any traction in October was enough to instigate a sizeable futures sell off.

Today, the futures market opened higher then failed and has posted an outside day with a potential lower close. There is good support just under today’s lows, but the action itself, other than Oct gaining on the other contract months, is sloppy. At the same time, daily technical indicators show the market finally reaching oversold, but that alone is not enough to give the market a positive spin. If the market rallied and closed higher on the day today -even though it will likely close lower on the week- that could be a start.

Yesterday’s negotiated cash cattle trade saw robust volume and packers have continued to purchase cattle today at steady money to yesterday’s trade. The likelihood of improving boxed beef prices next week and margins this week still +$100 per head make owning cattle inventory at steady a easy decision for packers. This week’s kill is estimated between 630k-640k head, down from last week and well over a year ago.

No one is predicting cash cattle prices will decline in Q4, but there is some debate as to how much upside potential exists, especially with cattle feeders such willing sellers.

There is more weather moving through much of cattle feeding country Sunday and Monday but then sunshine and warming temperatures will help some areas dry out. No doubt though, genuine concern is widespread that this will be a tougher winter than seen in quite a while. Cost of gains will be higher; the question is by how much.

Copyright © 2018 The Beef Read. All rights reserved.
The Beef is published by Consolidated Beef Producers.
Disclaimer:  The Beef, CBP nor Cassie Fish shall not be liable for decisions or actions taken based on the data/information/opinions.


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