By Cassie Fish, http://cassandrafish.com
CME cattle futures are posting triple digit gains easily today in an impressively strong performance. Yesterday saw what was likely a bottom in futures prices and a bottom in open interest. Open interest in live cattle futures lost 17,600 contracts in two weeks, dropping under 300k yesterday. Feeder cattle futures lost 20% of their open interest in three weeks.
Now that the JBS Grand Island facility is back in business today after yesterday’s disruption, the market had no reason to continue to fall. December LC had lost $12.55 and April LC $9.75 since August 24. Feeder cattle sold off much more dramatically, October feeders dropping $17.77 in the same time frame.
Today’s action cemented yesterday’s low as a big one and likely marking the best buying opportunity for quite some time. This was a check of the cyberattack low made June 1. The rally is orderly with higher highs, then a pull back then a push to new highs again. December LC has traded above the highs made everyday last week except Tuesday. The 100-day moving average for most active December LC is at $130.85, just 40 points above today’s high.
As futures have recovered activity in the country on cash fed cattle trade is extremely quiet. Some packers in the north don’t need many and will try and play it cool. But lower negotiated fed cattle trade this week appears unlikely.
Boxed beef values continue to erode, though the select cutout did print higher this morning. Net packer margins last week were still historically extreme.
The negatives still exist- which is primarily the sluggish fed cattle slaughter pace. Cattle weights seasonally increase until November and will be second only to last year. But fed cattle supplies will tighten significantly in Q4 and Q1 2022, so fed cattle prices will grind higher.
Copyright © 2021 the Beef Read. All rights reserved
The Beef is published by Consolidated Beef Producers
Use of part or all of this blog for any reason without permission is strictly prohibited.
Disclaimer: The Beef, CBP, Cassie Fish nor NFC Frontier Capital Markets shall not be liable for decisions or actions taken based on the data/information/opinions.
This material has been prepared by a sales or trading employee or agent of New Frontier Capital Markets and is, or is in the nature of, a solicitation. This material is not a research report prepared by New Frontier Capital Markets. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. DISTRIBUTION IN SOME JURISDICTIONS MAY BE PROHIBITED OR RESTRICTED BY LAW. PERSONS IN POSSESSION OF THIS COMMUNICATION INDIRECTLY SHOULD INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH PROHIBITION OR RESTRICTIONS. TO THE EXTENT THAT YOU HAVE RECEIVED THIS COMMUNICATION INDIRECTLY AND SOLICITATIONS ARE PROHIBITED IN YOUR JURISDICTION WITHOUT REGISTRATION, THE MARKET COMMENTARY IN THIS COMMUNICATION SHOULD NOT BE CONSIDERED A SOLICITATION. The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that New Frontier Capital Markets believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.