Rolling Over

By Cassie Fish, 

CME cattle futures rallied early then failed, the December and February contracts already taking out last Friday’s low, which was the day of the big rally. This week, futures have ignored the powerful news of all-time highs in the negotiated fed cattle market, content to keep their distance—and their discount. It would appear whoever bought the market last Friday, the day of +300 point gains, were one and done. Tuesday’s volume was a tiny 36k contracts and futures performance all this week has been underwhelming.

Spot June LC has posted an outside day but is back to clinging to green. With a $187.52 high June has failed so far to challenge the all-time spot futures high of $190.27 established in March, even though cash fed cattle prices pranced to new highs last week, the 5-area average $192.55 beating the old high established in May of $190.09 handily.

This is not unusual on major tops, that futures become more of a spectator than a participant. Afterall, lots of commercial short hedgers need a rally to sell to lay off high priced inventory for later this year.

The choice wholesale boxed beef market has been hanging out near the $320/cwt mark all week, printing down $0.30 cents this morning. The loin lost a lot of ground yesterday and the rib is expected to be right behind it with seasonally lower prices anticipated. The tight supply of lean product thanks to low cow slaughter this morning, will continue to lend aid to some fed cattle cuts.

Packers are doing their best to limit red ink and have had slaughter dialed back to the lowest level since 2016 since Memorial Day week. This week’s estimate is 610k to 615k head. These low slaughters may cushion the decline in the cutout and certainly record carcass weights are offsetting production cuts somewhat, but not entirely.

That leaves us with the negotiated fed cattle trade, which as of this morning has seen 2.9k head trade at generally steady prices, though a little higher in some instances. Last week’s 96k head negotiated buy might have been large enough to allow packers to top the cash, but that remains to be seen as trade waits to begin in earnest. The cattle feeders are still exercising their leverage.

The USDA’s Cattle-on-Feed report tomorrow is generally expected to be supportive for the market confirming a decline in numbers from a year ago—unless placements and thus, COF June 1 numbers are higher than average expectations.  

Copyright © 2024 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.

Please follow and like us: