By Cassie Fish, http://cassandrafish.com
There were 40 new cattle deliveries tendered against the Feb LC contract yesterday and Feb LC doesn’t seem to mind much. Of the 25 deliveries tendered on Monday, 19 were stopped by a long with date back in June and the word on the street is that a stopper might be willing to take all.
Those with experience trading CME cattle futures know a strong stopper is bullish. Why might someone take cattle with the price premium to the cash? For one thing, even though Feb LC expire on February 28, cattle can be physically delivered until March 15. This is because of the physical logistics limitations of delivery point processing.
Data will tell you that March is a strong seasonal for both boxed beef prices and negotiated cash cattle prices, meaning prices for both will likely be higher then than today. Carcass weights are always lower and this year could be 10 pounds under a year ago. Time will add value to cattle prices over the next 6 to 8 weeks.
Of course, in the north, there is urgency to sell cattle quickly because cost of gains have skyrocketed and cattle are treading water on performance. Temperatures across most of Nebraska today are bitterly cold with sub-zero wind chills. In the south, there is a different story but still, the overall tone of the market is strong as market-ready supplies seasonally tighten in the north in March, just as numbers start to pick up some in the south.
One positive ‘tell’ is the Feb/Apr LC spread, which has narrowed to less than $1- at the same time 59 total deliveries have been tendered in two days.
CME cattle futures have traded both sides today in quiet, choppy action today. But once again, the market continues to act pretty good. Feb is over $1 higher on the week and this week’s high is only 0.27 under last week’s high and $1.10 under its contract high.
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