Up and Away

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.

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