Perilous, nerve-wracking sell-off one day, steamy rally the next. CME cattle futures are plenty volatile as traders and analysts reach for explanations as to why the 2015 cattle market continuously falls short of the an even modest mark.
Aug LC 2015 thus far has put in one of the lousiest performances in history relative to Jun LC and the summer low, with less than a handful of other years as bad. The puzzle is with historically small numbers, why does the market act as bad as it does. Can the weakness all be blamed on lousy exports, big imports and record high retail prices slowing beef demand? Commodity bears? Or is something else in the mix?
Futures Refuse to Portend Any Seasonal Up
Oct and Dec LC futures priced under $150 clearly indicate this futures market has no confidence that any kind of normal seasonal rally into November in the beef cutout or cash cattle prices will occur. Traders that have bought the market looking for that seasonal up have been tested to the point to question whether any reward will come. Cattle feeders that have or are placing cattle against the winter period very likely have breakevens well above current futures with no opportunity to lay off risk.
Cash Craters Yesterday; Catches a Bid Today
Negotiated cattle trade did occur yesterday in the north, generally $2-$5 lower with lots of north cattle headed to Kansas to die. A day later $148 bids are being passed in Texas as the south attempts to, at the very least, capture the $149 gotten in western Nebraska and Colorado yesterday. Packers are big-time black now, $50-100 per head. Bears keep touting the beef is one verge of another break, in the meantime, choice boxes were the highest yesterday since July 6 and volume has picked up this week compared to last week.
Futures have rebounded today but have yet to alter the technical landscape which is still tenuous. A close above yesterday’s high could be the start of a more significant recovery.
So What is Going On?
We used to call a market with this kind of supply fundamentals and futures market structure a realizing bull, but on a bad day, this market seems to reflect fear more than any fundamental. The industry may not have real clarity about 2015 until it’s in the rear view mirror. Given that the heart of live cattle futures is the cash cattle market and the heart of the cash cattle market is price discovery perhaps an honest examination about that trend is as worthwhile as any. It’s hard to argue that the cattle feeder has the same bargaining power that he did just a few years ago. Even with the smallest fed cattle supplies in modern history. By the looks of chart below, was 2014 the last hurrah?
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.
Planned 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.