Cattle Market Dropping

Given live cattle futures and cash market action this week, it seems the market is giving up on its unusual spring bull run.  It was good while it lasted.

The Jun live cattle futures contract settled Wednesday at $124.50 per cwt, down the daily limit of $3.00, with Aug also off $3.00 at $117.87 and Oct at $114.80, down $2.57.

In the stretch from May 16 to June 6, the Jun live cattle futures contract gained $13.65 per cwt, or 11.3%, to top out at $134.22 per cwt from a low of $120.57.  The top last Tuesday was followed by a severe slide that the market could not regain by the close on Friday, and Friday’s nearly identical open and close showed a real lack of direction on the part of investors

The Commodity Futures Trading Commission’s Commitments of Traders report showed a lot of short covering in the week leading up to Tuesday’s peak, but long liquidation may be the theme of the next COT report.

Futures never did hold a strongly bullish attitude about cattle market prospects through the late-May rally.  Prices were always below the cash market, and futures prices were inverted, meaning they were higher in nearby delivery months than they were in deferred months.

Through the period, futures were being supported by cash cattle and strong wholesale beef prices.

However, now that USDA’s boxed beef prices appear to have lost some of their zip, if not their total strength, and cash cattle prices have traded sharply lower this week, cattle futures investors with long positions can’t seem to exit fast enough.

 

CASH LOWER LAST YEAR

 

If cash cattle prices this week average near $132 per cwt, as they seem to be doing, then Southern Plains cash cattle prices will show a drop from last week.  However, it will not drop below the 2011-2015 average for this week of $129.63.  It also will stay above last year’s $127.92.

A graph of Southern Plains cash prices clearly shows a decline into last year’s annual low of $98.02 per cwt the second week of October.

If cash cattle prices are set to hold a more seasonal path, then futures traders will need to become believers before the Jun contract expires June 29.  They’ll have to bring the Jun contract into line with the cash market by then.

 

CASH CATTLE LOWER

 

No trade was reported on the livestock exchange video auction amid more technical troubles.  Light trade was reported in Nebraska at $130 per cwt on a live basis, down $2 to $3 from Tuesday and off $6 to $8 from last week.

Cash cattle traded Tuesday at $132 to $133 per cwt on a live basis, down $4 to $5 from the bulk of last week’s action and at $215 dressed, down $3 to $5.  Some reports have this week’s cattle being sold for the first week of July.

The video auction last Thursday sold two pens of fed cattle at an average of $136.75 per cwt on a live basis, up $4.57 from $132.18 last week.  A little subsequent cash trading was reported at $220 per cwt on a dressed basis.  Most action took place on Friday at $136 to mostly $137.

The USDA’s choice cutout Wednesday was down $0.16 per cwt at $251.03, while select was off $0.79 at $220.66.  The choice/select spread widened to $30.37 from $29.74 with 78 loads of fabricated product sold into the spot market.

The CME Feeder Cattle index for the seven days ended Tuesday was $153.92 per cwt, down $0.29.  This compares with Wednesday’s Aug settlement at $146.12, down $3.82.