Northern Cash Trade Gets Underway

By Cassie Fish, http://cassandrafish.com

Cash cattle trade has occurred in Iowa and Nebraska at $172 dressed and $109 live, though volume is light and quality if a priority. In the south a bid of $106 has been noted and one packing plant is experiencing a slow-down due to mechanical issues.

This news has been supportive of CME live cattle futures though only spot Oct LC has made news highs for the move today. Volume continues to be light- yesterday saw a measly 35k contract daily total, exceptionally small for this day and age. Barring a late, unexpected sell-off, live cattle futures will manage to close higher on the week and above the 10-day moving average again, despite being overbought. LC 2020 contracts are trading at or near this year’s summer high while Oct and Dec LC are still lagging. Dec LC has a big roll that may limit it in the first half of November plus the first half of November can see cash soften some. Oct LC though is unfettered and could reach $110.60, its summer high before expiration.

The China ‘on’ headlines have been supportive of equities and commodities today as hopes run high that China and the U.S. will reach an agreement that will insure no more tariffs will be placed. What to do about the existing tariffs is a different conversation, but for now progress is seen as no further escalation of this several month-long trade war.

Only feeder cattle futures are exhibiting some fatigue today, likely cooled by the big rally in corn. Perhaps going forward the trade will fade the USDA’s refusal to lower corn yields in the face of this historically late crop and less than ideal weather? With Oct and Nov FC slightly premium to the index, it’s hard to make a case for more upside there right now.

Boxed beef prices have made their seasonal low and will increase from now until mid to late November typically.  Ribs, of course are the primary driver of the rally but this year rounds (choice and select) are averaging about $10 above a year ago supported by the globally strong beef 90s market. Rounds can and often are substituted for 90s.

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