Very volatile market action has become commonplace in live cattle futures. Nerves remain raw and traders unsettled by the enormous sell offs in December and January. Lately, each time cattle futures sell-off traders wonder “is it here we go again?”
Which makes the fact that Feb LC is posting a huge outside week and will close higher than last week’s settlement of $150.35 mildly remarkable. The way the week unfolded was positive too, a Monday low made during a capitulation panic. A nerve-wracking brief sell-off Wednesday that saw a respectable recovery.
This week’s positive action has been accompanied by a stabilization in the decline in OI and positive turn up in stochastics. In fact there’s a rather pretty potential bottom on the daily Feb LC chart that a close above $155.47 will project a rally north of $160. Though many still call a visit to the 50-day moving average of $161.95 before expiration unlikely if not impossible. While on the topic of positives, Feb/Apr keeps chugging and has made another new high at +327.
Cash Trade Mostly Steady
Cash cattle trade got underway yesterday at mostly steady money, also mildly remarkable considering it was a lock cash would be lower on Monday and that packers have mega-contracts scheduled to slaughter next week. Packers still seem to need inventory, which could make next week’s buy much more interesting than this week. Carcass weights are dropping rapidly, as reported by the USDA yesterday, trimming beef production.
New Bearish News?
But just as the tide feels as if it could be turning, bearish talk is renewed as some packers busily share plans to cut next week’s kill. Typically beef packer margins are lousy in February and its true since cash ended up steady this week that margins have eroded thanks to slipping boxed beef values this week. Also true, available supplies of market ready fed cattle, not already spoken for, are quite tight. Cattle continued to get hauled hundreds of extra miles to fill in gaps.
Another Year, Another Wall of Worry
Cattle futures will probably trade significantly discount in 2015. No one will soon forget the punishing breaks or the growing belief that +$170 was it and a major top has been made. But with the open interest flush behind us and a boatload of bearish news in the market, the cash market must decline enough to justify prices well below where cash prices averaged in 2014, $154.42. Thus far, cash prices haven’t even been able to test the low reached in December.
THANK YOU TO THOSE OF YOU THAT JOINED US FOR THE WEBINAR YESTERDAY!
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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.
A Handbook for Ranch Managers. In keeping with the “holistic” idea that the land, the livestock, the people and the money should be viewed as a single integrated whole: Part I deals with the management of the natural resources. Part II covers livestock production and Part III deals with the people and the money. Not only would this book make an excellent basic text for a university program in Ranch Management, no professional ranch manager’s reference bookshelf should be without it. It is a comprehensive reference manual for managing the working ranch. The information in the appendices and extensive bibliography alone is worth the price of the book.
You might also be interested in the supplement to this Handbook: Planned Grazing: A Study Guide and Reference Manual.