Cattle Futures Break Accelerates

So the blame has been laid on declining demand, both for beef and for cattle futures contracts.

A Handbook for Ranch ManagersThe demand for beef is a “derived” demand. It starts at the supermarket meat counter and works its way back through the marketing chain to the cow-calf operator. Sooner or later prices will get so high and/or quality so low that even SWAMBO (She Who Must Be Obeyed) will start substituting chicken and fish. — jtl

By Cassie Fish, CassandraFish.com in The Beef

Planned Grazing: A Study Guide and Reference ManualThe downtrend in CME live cattle futures which started in December and has continued pretty much since, is as huge as it is unique. On a spot basis, it’s $23.60 off the all-time high. But with record discounts in the deferreds it seems even bigger.

Environmental & Natural Resource Economics: The Austrian ViewThe tight beef supply driver of 2014 will still be with us until late in the second quarter. So the blame has been laid on declining demand, both for beef and for cattle futures contracts. Boxed beef cutout prices have and continue to trade well above a year ago through this time frame, but exports have slowed and cheap competing meat supplies have grown. At the same time end users stockpiled trim in the freezer for some protection from what will be another year of small non-fed kill and our huge and growing dependence on imported beef to supply domestic ground beef demand, *up 53% YTD, YOY.

The Betrayed: On Warriors, Cowboys and Other MisfitsIt’s fascinating and frightening that some of the bearish market factors to have surfaced over the last 3 months, when resolved, have had no positive effect on futures prices afterwards. Most recent case in point is the resolution of the West Coast port labor dispute late Friday.

Live cattle chart patterns now are overwhelmingly bearish and open interest has started a small build as short hedgers lock in losses and money managers following trends both seek and compete to sell any buy orders underneath the collapsing market.

Combat Shooter's HandbookSomething, or perhaps more than one thing, seems to be casting a long and dark shadow over this market. The bears are content to point to total beef production, down 5.1% but boosted 1.7% by record carcass weights and record choice+prime grading as proof of uncurrent feedyards. But as everyone who trades cattle know, packers have and keep turning themselves inside out to make sure they don’t miss out on the very few large strings of fed cattle that trade (basis or otherwise) occasionally in Kansas and Nebraska. Most recently, the widely discussed +$7 over Apr LC trade speaks to both the need to secure inventory and the disbelief in futures trading par to cash, let alone premium. “Tops” trades have already been done this week at $1.50 over, though there will be little actual cash trade at most certainly lower money. Packer margins are improving quickly and could be even to positive by next week.

The Essence of Liberty: Volume I: Liberty and History: The Rise and Fall of the Noble Experiment with Constitutionally Limited Government (Liberty and ... Limited Government) (Volume 1)  The Essence of Liberty: Volume II: The Economics of Liberty (Volume 2) The Essence of Liberty: Volume III: A Universal Philosophy of Political Economy (Liberty: A Universal Political Ethic) (Volume 3) As things improve for the packer, maybe cash cattle prices can consolidate in the $150s in March. Interestingly, a year ago this week, the 5-area average was $150.61 and March 2014 saw prices between $149 and $152, begging the question, are the fundamentals really such a wreck that cash cattle prices are headed below year ago levels, as priced by April LC futures?

We won’t have this week’s comprehensive cutout until next Monday, but it was $239.30 last week compared to $218.12 a year ago this week. These numbers seems a clear illustration that the industry is in the midst of a huge transfer dollars from the cattle feeder to the packer.

*Thanks to MP Agrilytics, http://mpagrilytics.com, for providing insightful analysis that contributed to today’s blog.
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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A Handbook for Ranch ManagersA 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 be interested in this books supplement: Planned Grazing: A Study Guide and Reference Manual.

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One Response to Cattle Futures Break Accelerates

  1. p says:

    Like your observation Jimmy. Throw in an extra cold winter and record amounts of snow with the higher costing home heating required (thankfully prices had been down) and beef pricing heading towards luxury item and you have a recipe for sales decline. Won’t discount the overall increase for groceries that has been hitting many or the so called low number of unemployed either. It all contributes.

    Like

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