By Cassie Fish, http://cassandrafish.com
A lousy Friday’s close in CME cattle futures followed by a Monday morning rally for the third week in a row- it’s getting to be a pattern.
As we start the last week in June, some interesting facts compared to a year ago:
- Jun LC is trading lower than where Jun LC 2018 expired, which was 107.
- Cash cattle prices last week averaged $110.48, $1.74 above a year ago. Even with cash called lower for this week (packers bought 103k head and are buying for a short kill next week) last week’s cash was the low for 2018, averaging $106.86.
- Boxed beef prices averaged $2.25 higher than a year ago last week on larger production, supported by all primals except middles. 90s and 50s are above a year ago, 50s $30 higher.
What does this tell us? Despite cash cattle and beef prices continuing to be stronger than a year ago, the CME cattle futures complex portends bearishness. Cash feeder cattle prices are lower than a year ago because of higher corn and cheap deferred futures prices. The 2019 outlook continues to be more bearish than a year ago.
Is market psychology too bearish? Here’s some math. From January through May 2019, the cattle feeding industry placed 119,000 more cattle than a year ago, way fewer than most analysts predicted at the beginning of the year. Ample grass availability has had a say in that. Placements in June and July will likely be below a year ago, dropping total on feed numbers to slightly below a year ago by August 1.
In May, the cattle feeding industry marketed the largest number of cattle since 2008 with the same number of kill days. In June, the industry will slaughter more fed cattle than a year ago with one less kill day.
In the north, there are numerous reports of July cattle already being slaughtered. Weights are below a year ago and will likely stay below a year ago in June, thanks to an aggressive fed kill. And speaking of the north, Nebraska, South Dakota, Minnesota and Iowa have 180,000 fewer cattle on feed than one year ago on June 1.
This week’s kill is estimated at 668k to 672k head, the fed kill likely 540k head. Showlists dropped hard this week in all states. Last week’s total negotiated trade was 103k, 26k head sold with time and the average price was $110.48. Jun LC is $4 below last week’s cash. Can packers press cash $4 this week?
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