On the Mend

By Cassie Fish, http://cassandrafish.com

At least for today, CME cattle futures continue to rally and recover from last week’s losses, already taking out last week’s high and the 10-day moving average. From August LC onward, the market is back trading above the 100-day moving average as well, giving the charts the look that last week’s sell-off was just a check of the big low made week before last.

Cattle have become a follower and a reactor—sometimes following equities, and most of the time acting opposite of corn and wheat. That is the case today. Friday’s CFTC Commitment of Traders Report showed a huge decline in managed fund longs and increase in managed fund shorts and a decline in commercial shorts – all which are typically positive.

It is way early to have confidence in the market action given the extreme uncertainty regarding events in Ukraine. Some believe the cattle market has found the lower end of what will become another trading range. Very few believe the market has the ability to return to the February highs, which were the highs for the move.

On the fundamental side, last week’s harvest was smaller than expected at 644k head as two, not one fed plant appeared to be dark Friday and Saturday. This week’s estimate is 650k for now.

Packers purchased 81k head last week, enough to keep them going at prices generally about $2 lower than the prior week and about $5 lower from the $143.22 top just two weeks ago. Expectations for cash prices this week are generally steady to strong as long as futures continue to exhibit strength.

Boxed beef values have seasonally bottomed with middles expected to lead the way. And keep your eye on beef 50s, an essential item for processed meats, including hot dogs, which sees an increase in production this time of year. Last week 50s averaged $107.55 and closed Friday over $110- record high for this time of year.

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