Markets Stabilizing

By Cassie Fish, http://cassandrafish.com

Almost all markets opened higher today, shaking off the uncertainty surrounding the coronavirus story. Though CME livestock futures failed to hold early gains, slipping into red even though the market is well-off yesterday’s lows. Cattle futures so far have been unable to trade above the 10-day moving average as a consolidation area appears to begin to build.

Live cattle futures open interest plunged again 6,730 contracts yesterday, total OI now over 50k contracts below the high week before last. Yesterday was day 8 of long liquidation.

Fundamentally, January saw record beef production thanks to an aggressive slaughter schedule, ample fed cattle supplies and profitable packing company margins. Last week’s USDA Comprehensive Boxed Beef report showed values very near last year and the 5-year average, remarkable for the level of production.

Expectations for this week’s cash trade are for prices to be steady at worst and possibly higher if the futures market can mount a modest rally. Packer purchases last week at 85k head were not large in light of the slaughter pace, even when considering packers are likely pull forward contracted cattle rapidly.

One thing of interest, grading in Texas continues to decline and the number of cattle grading choice+prime is now 8% below a year ago. Is it a sign of currentness? A larger number of lower quality cattle in mix? A drop in Nebraska grading coupled with Texas has pulled the total number of cattle grading choice+prime below a year ago.

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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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