Commodity trading runs on two fuels–fear and greed. jtl
From CassandraFish.comBy Cassie Fish,
Also retracing to levels not seen since early June are all LC contracts from April LC on back. The third quarter lows are history while the market revisits the big breakout area which followed the major low made in live cattle futures on May 27 and May 22 in feeders. That late May futures low was made $5 discount to cash prices at the time, cash bottoming at $144.39 on the 5-Area average reported by USDA. Amazingly, today Jun LC 2015, reaching $141.10, has traded with $5.70 of the spot low made by Jun LC 2014 on May 27.
These facts are powerful reminders of the continuation of the disconnect between cash and futures, since last week’s negotiated live trade averaged close to $159.60, above the December 2014 cash low of $158.51 and far from the August 2014 cash low of $153.16.
Commercials Go Bargain Hunting
The extreme discount of futures to cash did inspire some long hedging as last Friday’s Commitment of Traders’ report, with activity through Tuesday, Jan 20, confirmed money managers and swap dealers have heavily liquidated positions, over 14k, while commercial players increased long ownership by 11k as long hedgers take advantage of futures prices below where cash prices traded much of 2014.
Today’s action has taken futures within the vicinity of some historical mathematical extremes. At this point, other than fear and money pressures, plausible explanations are scarce for the violent, extreme market action.
Real World Check-in
In the real world, tops bids were noted early today at $1.50 over. Packers are black and in need of inventory, which they fully expect to buy cheaper.
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