By Cassie Fish, CassandraFish.com via
Most active Dec LC is rallying this morning but it’s really been going nowhere fast. Instead for 2 weeks it’s wearing out the pavement between $165 and $170 just ahead of the roll. Dec has been supported, especially psychologically by the historical bull performance of Oct LC. But bears have a list of reasons why Oct is the end of the bull run and Dec is no good. Aspects of the bear thought process are valid and worth considering, since Dec futures expire December 31, a timeframe when both beef demand and fed cattle demand both will be limited.
Last year when packer margins were under pressure, slaughter Christmas and New Year’s holiday weeks was historically small at 432,100 and 524,800 head respectively and this year is expected to be as small or smaller. In fact last week’s kill of 576,000 head was likely the largest for the remainder of 2014 as each week until the first full kill week of January, will fall sometimes dramatically below a year ago.
Bears believe the kill cuts will be so severe for such an extended time frame that even though fed cattle numbers are low, that currentness will be chipped away week by week. With incentive to feed cattle to heavier weights pushing tonnage ever higher coupled with what the long-range weather forecast indicating a warmer and drier November than normal, bears think by the time early January is reached, the cattle feeder will have lost some significant bargaining advantage.
Of course these are just ideas and words, and Dec will probably be buffeted about between the reality of solid cash prices and expectations $170+ won’t last through the first half of November. All the while, traders will be enticed to bear spread Dec, piling on for the roll out of Dec and into Feb by funds.
There’s a couple of bullish fundamentals that may come into play that could make being short Dec uncomfortable at times. The rib primal finally broke out above $360 yesterday indicating the seasonal rally there is in force and it’s not inconceivable ribs could gain $30 more. Another is packers still have to supply kills and some plants are short bought for next week in spite of multiple tactics to avoid being so. Inquiry this week is still quite subdued, though a $168 bid or two has surfaced and a fully steady to higher cash trade is expected.
A Pause Perhaps
The cattle trade over the next couple of months may offer something for everyone. A push over $170 followed by a break to $165 or $162 doesn’t seem out of the question. This action would translate only to another correction in a long term bull market, not a major top in a long term historical bull, unless you believe a market like this one will never experience a blow off. The Jan/Feb 2014 blistering rally was led by demand for grinding material and created by pipelines left empty by tiny holiday kills. Sound familiar? One doesn’t have to be an active grain and oilseeds traders to be aware of what an empty pipeline can do, aka, the soymeal rally of October 2014.
Dec LC may not be a standout in the Bull of 2014, but the Bull of 2015 may dim that memory very quickly.
The Beef is published by Consolidated Beef Producers…for more info click here.
Disclaimer: The Beef, CBP nor Cassie Fish shall not be liable for decisions or actions taken based on the data/information/opinions.
Murray N. Rothbard was the father of what some call Radical Libertarianism or Anarcho-Capitalism which Hans-Hermann Hoppe described as “Rothbard’s unique contribution to the rediscovery of property and property rights as the common foundation of both economics and political philosophy, and the systematic reconstruction and conceptual integration of modern, marginalist economics and natural-law political philosophy into a unified moral science: libertarianism.”
This book applies the principles of this “unified moral science” to environmental and natural resource management issues.
The book started out life as an assigned reading list for a university level course entitled Environmental and Natural Resource Economics: The Austrian View.
As I began to prepare to teach the course, I quickly saw that there was a plethora of textbooks suitable for universal level courses dealing with environmental and natural resource economics. The only problem was that they were all based in mainstream neo-classical (or Keynesian) theory. I could find no single collection of material comprising a comprehensive treatment of environmental and natural resource economics based on Austrian Economic Theory.
However, I was able to find a large number of essays, monographs, papers delivered at professional meetings and published from a multitude of sources. This book is the result. It is composed of a collection of research reports and essays by reputable scientists, economists, and legal experts as well as private property and free market activists.
The book is organized into seven parts: I. Environmentalism: The New State Religion; II. The New State Religion Debunked; III. Introduction to Environmental and Natural Resource Economics; IV. Interventionism: Law and Regulation; V. Pollution and Recycling; VI. Property Rights: Planning, Zoning and Eminent Domain; and VII. Free Market Conservation. It also includes an elaborate Bibliography, References and Recommended Reading section including an extensive Annotated Bibliography of related and works on the subject.
The intellectual level of the individual works ranges from quite scholarly to informed editorial opinion.