It’s A Grind

By Cassie Fish,

CME cattle futures continue to methodically trend higher, taking out last week’s highs by just a bit, in quiet trade. The only change from last week is that Dec LC is leading today and Aug LC is struggling to keep up with all but April LC. Today is the sixth consecutive gain for futures and each of those days have seen a new high with a small daily trading range.

Technically the market is overbought and has a sense of being stretched. There are a few things occurring that could be signaling a correction is imminent. One is feeder cattle futures losing for live cattle futures as of late and overall struggling to stay green. Another is the toppy spread charts for bull spreads.

The boxed beef market isn’t grinding but surging higher, up $2.17 at $216.14 on choice today after a more than $3 gain Friday. An objective of $220 by next Monday, the timing for a seasonal top, will be easily attained. Expect good beef features for Labor Day weekend, Sept 4-7 this year. August retail beef prices should be down from July, though well above a year ago and pork and chicken prices.

Packers will crank up slaughter this week to meet demand, look for a 650k this week, the largest since June late June and early July. Last year’s slaughter for this week was 657k.

Wide expectations for cash cattle prices this week are another $1 to $2 higher. The big surprise is that last week’s national negotiated direct cattle trade volume was 122k head, one of the biggest transfers of ownership from feeders to packers of 2020. This large ownership may give packers more patience this week and could slow the rise in cash cattle prices. Next week’s slaughter is already estimated to be smaller than this week.

The net decline in showlist offerings has slowed as the market has rallied. Some feedyards, including large corporates, will see show lists grow in September, from Texas to Nebraska. And basis traders will be eyeing the Oct LC basis with a laser focus.

Weights will stay elevated at record levels, as shorter days and cooler nights result in adding pounds to cattle already carrying plenty.

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