Cattle Futures Waiting on Cash Trade

From The Beef By Cassie Fish, CassandraFish.com

Higher early, the first four contract months haven’t taken out yesterday’s highs yet and all but expiring Dec are below the 40-day moving average. The recovery off the lows has been impressive but the larger question is how far can most active Feb push into the substantial overhead resistance, looming from $168-172. With rollover and fund rebalancing both on tap in the coming days, many traders are in the “sell the rally mode.”

Both higher fed cattle and boxed beef prices this week are already priced in today’s futures market leaving most traders debating the real question of how far this cash rally carries into January. Traders and analysts will be dissecting developments as they unfold the first couple of weeks with more scrutiny than usual as the resumption of post-holiday commerce throughout the supply chain holds the clues.

         Will 2015 Look at All Like 2014?

Will we bring any of the earmarks of the Bull of 2014 with us into 2015? Many if not most analysts have lower expectations for 2015 than the spectacular rise witnessed this year. Truth be told, no one expected what occurred in 2014, even with the full knowledge that we had historically large beef cow slaughter for 6 consecutive years.

The biggest surprise of 2014 was the discovery of the inelasticity of beef demand, particularly ground beef demand. A major drought in Australia timed just as the U.S.’s need for more boneless trimmings had become acute stalled the rally in domestic 90s just over $300, though little downside has been seen since.

2014-12-31_Chart1

U.S. imports of AUS beef are up 60% YTD from a year ago, according to stats released by the USDA today, easily the largest source of grinding beef from outside the U.S. The stronger U.S. dollar has made imported beef even more attractive, but the domestic shortfall is so great the imports would have taken place regardless. The grinding of certain fed cattle cuts for ground beef took place before 2014 also, but that practice, though harder to quantify increased as well this year and will continue in 2015 as beef female slaughter remains low.

         Last Rally a Supply Rally; Next Rally?

With beef trimmings pouring in from overseas, the final rally of the 3 big rallies of 2014 was because of very tight fed cattle supplies, not demand, which pushed packer margins way over into the red. Much of that loss has been recovered recently. If beef demand reinvigorates in January then the market may experience enough momentum to easily challenge the overhead resistance. If not, then January may see nothing but a $160 to $170 trading range, in front month futures and cash prices.

         Happy New Year and Thank You

Many thanks to each one of you around the globe for taking time out of your busy lives to stop by and read The Beef as we examine these challenging markets and historic times. We truly appreciate your support and positive feedback. Here’s wishing each of you a prosperous and healthy 2015.

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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About Land & Livestock Interntional, Inc.

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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