Cattle Futures Extend Wednesday Losses

Live cattle futures are lower in overnight trading, extending Wednesday’s steep losses in a reversal day that saw the April contract gap higher to a new contract high before dropping below the daily ranges of the previous five sessions combined.\r\n   A gap on daily charts that was opened on Feb. 26 halted Wednesday’s slide.  Overnight prices are holding above Wednesday’s April contract low of 143.30, but they’re still lower.\r\n   ADMIS analysts said the daily stochastics oscillator, which is a measure of momentum, has turned bearish.  Further indications of a trend may come if the contract fills last week’s gap on the daily charts and doesn’t bounce.\r\n   However, Wednesday’s close above the 9-day moving average suggests the overall trend in the cattle market remains bullish.\r\n   Market analysts credited long profit taking in the cattle market with the initial pressure that started the drop.  From there, the market touched off sell-stops that only added to the selling interest.\r\n   The Commitment Of Traders report shows speculators held large long positions and were vulnerable to a sudden drop in prices, and a lack of fresh buying interest on the drop only fueled the sell-off.\r\n   Fundamentally, there were a few things that could have supported the market.  Beef prices were reported higher by the USDA, which could support live cattle prices.\r\n   Indeed, there were indications of stronger markets in the Plains Wednesday with about 2,000 head of slaughter-ready cattle changing hands in Kansas at $145 to $148 per cwt on a live basis.  This is steady with last week’s trade. \r\n   The USDA reported its choice cutout value Wednesday at $234.51 per cwt, up $2.75, while the select cutout rose $2.19 to $231.93.  The choice/select spread widened to $2.58, but there were only 98 loads of fabricated product sold into the spot market, an indication that buyers were pushing back against the high prices.\r\n   Some buyers may be looking ahead to April features, but the spot beef market remains somewhat thin and supported by limited slaughter.  The USDA estimated slaughter Wednesday at only 106,000 head, well below the 115,000 of a week ago and last year’s 116,000.  For the week, slaughter is up a little at 334,000 head, from 331,000 last week, but it’s down from last year’s 356,000.\r\n   There is debate about whether the slow slaughter rate is caused by a lack of available cattle or whether the harsh winter weather has held growth and fattening rates back.\r\n   Stochastic indicators also have turned bearish for Lean Hog futures, after rallying to a new contract high on Wednesday and then pulling back, ADMIS said. \r\n   “Momentum studies are trending lower from high levels, which should accelerate a move lower on a break below first swing support” at 105.97, ADMIS said.  And the key reversal from contract highs could attract more speculator selling as traders reward themselves after a long upswing in prices.  \r\n   Besides, the futures market has gotten ahead of the cash market, which also is rising.  Traders may feel it’s time to allow the cash to catch up.\r\n   Concerns over pork supplies because of high death losses related to the Porcine Epidemic Diarrhea virus remain entrenched in the hog markets, however, so a profit-taking pull-back may be short-lived. \r\n   Corn futures, which had led grains and soybeans higher this week, are down in overnight trading.  Some analysts thought Wednesday was the last day of new commodity fund money coming into agricultural commodities.  \r\n   Weekly corn export sales are expected to remain strong in this week’s report.  Estimates call for sales to be well above the level needed to meet the USDA’s estimates for the year.  \r\n   Strong export sales have been a major supporting factor for the corn market, but since political turmoil in Ukraine has not affected Black Sea grain exports, the world is breathing a little easier.\r\n   And climate research continues to support ideas of a fairly normal 2014 growing season for the Northern Hemisphere, market analysts said.  Current cold weather will limit planting in the short term, but it’s too early to be overly concerned about a late planting season.\r\n   The CME Feeder Cattle Index for the seven days ended Tuesday was $172.21, up $0.23 while the March futures contract closed Wednesday at $172.22, down $0.67.\r\n