Feb LC Loses $10 Since Last Friday

Most cattle traders, even bears, are stunned by the over $10 decline since last Friday’s opening in Feb LC. It’s been an ugly, gut-shot kind of a sell-off that has quickly taken the market back within spitting distance of the December lows.

         Another Technical Test

In fact, Feb is flirting with the spot low from Dec of $155.95, a low which had checked the $154.50 spot low made in September. A weekly close below these key spot chart points would be construed as bearish technically and the next area of support $151.75. On the other hand, if the low holds, the spreads turn and the market leaves a tail, a major double bottom is possible.

         All News Threads Seem to Lead to Deflation

Analysts keep reaching for reasons to explain the plunge in values and disconnect from physical prices and the most popular explanations are not quantifiable. But perceptions and beliefs rather than facts can rule the day in the age of big money fund traders, Twitter and CNBC.

Deflationary influences on most commodity prices led by the lowest crude oil prices since 2009 is the most popular news thread. Throw in the strong U.S. dollar that many say is bound to keep 2015 exports in check. In fact it’s hard to find a commodity, save gold and coffee, that hasn’t sold off this week and equities haven’t been immune either.

Can a Bearish Fundamental Case Be Made?

Some also want to take aim directly at the cattle complex with bearish rhetoric relating to warnings of waning beef demand which cannot be substantiated as of yet and increasing competing meat supplies for 2015 which can. Check out the New York Times Food section today, prime rib is making a posh comeback.http://nyti.ms/14WErqJ

Regardless of what “handle” fed cattle prices have, $145 to $170 the underlying supply fundamentals for cattle and beef for 2015 are still generally positive. Imports from Australia are flowing straight to the American fast food industry, making up for a great deal of the domestic short fall in grinding beef and keeping a lid on domestic 90s around historic highs of $300. A slowdown in Aussie exports in 2015 would have a significant positive impact on prices in the U.S. that would be felt in all sectors.

         If +$170 Is Too High, What’s Too Cheap?

A favorite of bears in 2014 was the mantra “these prices cannot be sustained”. It could be argued that a major long term down trend cannot be sustained in live cattle futures, given fundamentals and an already $17 break.

Lots of traders still agree +$170 is too high. Perhaps the market is on a mission to rediscover “value” or as traders say, how cheap is too cheap?

         In the Midst of the Storm…Packers Bid $164-164.50

With black margins for next week’s slaughter highly likely, packers are out attempting to cheapen up their inventory holdings as they see “value” thus putting a floor in the fed cash cattle market for this week.

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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