New Week; Same Old Downtrend

By Cassie Fish, CassandraFish.com

A Handbook for Ranch ManagersIt’s only the beginning of the third week of 2015 but the downtrend in CME cattle futures that resumed on January 8 is picking up an ugly head of steam. Within 30 minutes of this morning’s opening new lows for the move have been made in every live cattle futures contract pushing the break to over $14 in Feb LC.

Open interest continues to decline too as more and more traders move to the sidelines pressured by margin calls and a bearish technical outlook. LC OI dropped another 2.1k Friday to a new low for the move of 259,238 contracts.

Boxes Break; Cash Fed Bids Scarce and Lower

Cash prices are weakening and boxed beef prices appear to have topped seasonally last week, pretty much on cue, and have already begun to slide $3-$4 since posting last week’s all-time high.

Cash bids yesterday were scarce and a few “tops” traded +2. What few cash bids that did surface were dramatically lower than last week’s market as packers take aggressive advantage of the opportunity to press their margins further into the black. When using the USDA comprehensive boxed beef report, margins last week swung at least $80 in favor of packing plant P&Ls to close to a $15 profit and the 5 year average, according to *MP Agrilytics calculations.

Packers didn’t buy many last week and it’s highly likely this week’s kill will be the largest since before Christmas meaning trade volumes must increase this week. But with live cattle futures trading limit down, the advantage will be with the packers.

Charts Paint Bearish Picture

2015-01-20_Chart1

The technical outlook is blatantly bearish and the August low is in jeopardy. In Feb LC that equates to $148.80, which might sound outrageous considering cash traded last week above $160. If Feb LC equaled the break now that it saw in December, that objective is $149.32.

The explanations for this break haven’t brought much clarity but fear of a monumental wreck in cattle country is widespread. At some point this runaway break will be deemed overdone. But not today.

*MP Agrilytics of Collierville, TN is a proprietary provider of comprehensive livestock and meats data, analytics and research.
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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Planned Grazing: A Study Guide and Reference ManualPlanned Grazing: A Study Guide and Reference Manual. This is the ideal squeal to A Handbook for Ranch Managers.  Although the ecological principles remain the same, what was originally known as “The Savory Grazing Method” now answers to a multitude of different names: ranching for profit, holistic management, managed grazing, mob grazing, management intensive grazing, etc. Land & Livestock International, Inc. uses “Restoration Grazing” under its “Managing the Ranch as a Business” program.” No mater what you call it, this summary and synopsis will guide you step by step through the process and teach you how to use it as it was originally intended. No more excuses for failing to complete your grazing plans.

You might be interested in this books supplemental volume: A Handbook for Ranch Managers.

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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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