Did you miss your hedging opportunity? Only time will tell. — jtl
CME cattle futures decisively plunged on this morning’s opening, communicating clearly this market is not done going down. Friday, LC futures obliterated the November lows with spot Dec posting its worst weekly close since September and worst daily close since mid-October. Futures have descended into the most oversold territory since August. Critical technical support looms just below today’s spot low of $162.87 in the $161.75 to 162.20 area.
Cash Wraps-up Trade Lower as Expected
Friday afternoon, cash traded in western Kansas and western Nebraska/northeast Colorado at $168, $4-5 lower than the prior week and $1 higher than the central and eastern Nebraska and Iowa trade a day earlier. Packers are executing an effective full court press and that strategy will stay in place for a couple of more weeks since the seasonal slide in boxed beef prices is just getting started and plant margins are none short of horrible. Cattle feeders can’t be all that surprised in the retrenchment in values as its been widely known late year kill cuts were coming and packers would do whatever it takes to dig themselves out of red ink. Tops bids this morning are only $1 over.
How Low is Low
Futures have arrived within a little more than a buck of big time support very quickly and it’s only first notice day. Open interest dropped big on Friday too as traders dive for the sidelines, and OI has returned to the bottom end of its trading range. Traders are wondering if this is the beginning of an even bigger washout or just a substantial technical correction to the bottom of a trading range, setting up a Q1 rally.
The technical pictures doesn’t look nearly as dire in FC futures or deferred fats where summer fats and feeders haven’t taken out the November low.
What the live cattle futures market has done is accurately portend a big seasonal correction in cash fed cattle and wholesale beef prices, corrections underway in cattle prices and only beginning for boxes. The last couple of Decembers trading action have been tepid compared to December 2014, but then that has been true of the entire year. Once the decline in cash prices accelerate, look for futures to find their footing and likely chop into the Christmas holiday.
Probabilities are good that another rally in the entire cattle complex will occur in January, which is no secret from packers, cattle feeders or traders, making the real question when and where to buy this break.
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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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