Live Cattle Futures Break Gets Ugly

via The Beef By Cassie Fish,

The wild and whippy trade continues this morning with Dec, Feb and Apr LC making new lows for the move quickly and Dec and Feb trading below the 40-day moving average for the first time since the big August correction, reaching the lowest level since November 7 in most active Feb and over 600 points off of the high. Technically, LC futures are experiencing their biggest correction since mid-October.

There is plenty of banter on the airwaves to drive commodity bulls to the sidelines and amplify any bearish tendencies. Concern that the strongest U.S. dollar since 2010 will slow beef exports; the cheapest crude oil prices since 2010 and talk of even lower prices has fueled deflation concerns.

         Beef Cutout in Trouble

Closer to home, there’s growing talk that the rib primal has topped at record prices, while the chuck struggles too, losing over $4 Tuesday afternoon. Yesterday the USDA boxed beef cutout printed lower for the day and from a week ago signaling the seasonal slide in values has begun. A retracement to the $250 area by the end of the month is possible, depending on the magnitude of the rib break.

         Cash Cattle Correction Next; Top Talk Back

All this negativity leads to the probability that cash cattle prices are also due a correction off of all-time highs. Some cattle traders might even argue that the highs posted the last couple of weeks were the highs and unless winter weather is severe in Jan/Feb, the market has topped. Record weights and the incentive to continue to create more big cattle coupled with assertions that sky-high retail prices have hurt demand are the driving logic behind “top talk”.

Though with futures trading discount and no blow off in futures, there are other astute traders wary of making such a claim. Irrational exuberance has been noted in the cash feeder cattle market the last couple of weeks, so for some that could be a significant bearish red flag. There’s also a question as to how many fed cattle will be held over into January as fed cattle prices dip and slaughter levels drop.

There really isn’t much argument that live cattle futures selling off in December after making new highs pre-Thanksgiving is anything but expected. The relevant question is where this market finds value on the break. $164.90 was the spot low in November and only a buck above big cash cattle chart support, looking a lot like major long term support.

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.

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Land and Livestock International, Inc. is a leading agribusiness management firm providing a complete line of services to the range livestock industry. We believe that private property is the foundation of America. Private property and free markets go hand in hand—without property there is no freedom. We also believe that free markets, not government intervention, hold the key to natural resource conservation and environmental preservation. No government bureaucrat can (or will) understand and treat the land with as much respect as its owner. The bureaucrat simply does not have the same motives as does the owner of a capital interest in the property. Our specialty is the working livestock ranch simply because there are so many very good reasons for owning such a property. We provide educational, management and consulting services with a focus on ecologically and financially sustainable land management that will enhance natural processes (water and mineral cycles, energy flow and community dynamics) while enhancing profits and steadily building wealth.
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