Cattle Market Gets Real Ugly

 A Handbook for Ranch ManagersIs this the beginning of the end we have been waiting for? I hope you had ’em hedged. — jtl

By Cassie Fish, CassandraFish.com

CME cattle futures are posting triple digit losses today, making new lows for the month, now less than 200 points off of the July low. Small fat cattle auctions around this week are generally $4-6 lower. A little negotiated trade has occurred in the  Planned Grazing: A Study Guide and Reference Manual Corn Belt and there were rumors early of $147 in northwest Iowa, about $3 lower than last week. But as the break in futures advances, more rumors of $232-233 in eastern Nebraska, $5-6 lower dressed than last Friday. There is even an unsubstantiated claim some packers will start discounting carcasses over 1,050 pounds, something not seen in a long time.

Environmental & Natural Resource Economics: The Austrian ViewMarket psychology and bargaining position are a tricky thing. No doubt Tyson’s announcement last Friday has seemed to topple the apple cart and clearly swung power to the packers. Margins are nicely black for packers this week and will grow for next week, even with some boxed beef items beginning to slip lower, mainly fat trim and rounds thus far.

Combat Shooter's Handbook Reconnaissance Marine MCI 03.32f: Marine Corps Institute The Betrayed: On Warriors, Cowboys and Other MisfitsThis week’s kill will probably come in close to last week’s 540k as at least one plant is rumored to have added a Saturday shift to pick up the slack left by the Denison closing.

Some of the Corn Belt cattle that have sold this week are rumored to be headed to Kansas to a slaughter facility there where numbers are tighter than up north.

Perhaps looming in the background, even more than the immediate news, is the nagging sense that the eroding negotiated market and the willingness of producers to sell tops, basis or formula has, in of itself, handed the majority of the of bargaining position to the packers this entire year. The proof is pretty plain when examining recent history to find rallies pretty muted and short-lived in spite of historically low supplies producing 4.7% less beef than last year YTD.

               How Much More Down?

A panic sell-off like this one is always difficult to figure. On the plus side, open interest is small but the negative side of that is volume is light and trading is quite thin at times. There seems to be little interest to trade this market from the long side for big specs or commercials, at least not yet.

There had been a high degree of confidence the cash summer low was in at $144-145, though the 5-area average was $145.48 for that week. Aug LC has retreated below that level today and while it had been losing to the rest of the contract months all week, has in the last few minutes caught against Oct LC with the spread now back to about even. Technically, the market is about 2/3rds of the way through a correction, but is certainly not oversold.

An October/November rally is still likely, but it looks like it will be a slog to get there given this week’s developments.

Copyright © 2015 The Beef Read. All rights reserved.
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.

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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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