Feeder Cattle Markets Smoothing, Still Bearish Near Term

Part of the quandary for traders during the five-day, limit-down drop was that futures were dropping much faster than the cash market.  Yet cash also was, and is being weighed down with extra supplies coming through the auction rings, sources said.

USDA data show that all weights and classes of feeder cattle and calves were $10 to $15 per cwt lower, with some off as much as $20.

The CME Feeder Cattle Index Friday was at $230.63 per cwt, down $6.27, or 2.65%, from $236.90 the previous Friday.  It also was off $13.56, or 5.55%, from the record high of $244.19 set Dec. 4.

The nearby Jan futures contract dropped the daily limit of $3.00 per cwt for five straight trading days beginning Thursday, Dec. 11, and ending Wednesday, Dec. 17.  To be fair, the contract also fell the expanded limit of $4.50 on Thursday, Dec. 18, but closed higher.

The contract then gapped higher leaving an “island reversal” on western charts, which is a bullish indicator.  Candlestick chartists also noted a “hammer” in Thursday’s trading pattern, also a bullish indicator.

The CME Index for the seven days ended Friday was $225.70 per cwt, down $4.93, or 2.14%, still well above Monday’s Jan futures close at $220.50, up $3.50, but closing in.

However, the Index’s decline through Friday, along with its $3.27, or 1.39%, decline through Wednesday, highlights the tug of the futures market on cash trading.




In fact, the joyride that took cattle markets to record highs this month may be over for now, market sources said.  Demand for holiday meat cuts is subsiding as retailers concentrate on moving on-hand supplies while consumers are still in a buying mood.

Beef markets are heavy after losing nearly $19 per cwt this month.  The market might even be weaker, but it is being supported almost entirely by reduced slaughter over the last few weeks

That lower product market is likely to weigh on cattle markets into the new year, sources said.  Over the last six weeks, fed cattle prices have gone from $173 per cwt on a live basis to $157 with many saying they likely will decline even more before finding solid footing.

Feedlot supplies were above a year ago Dec. 1 for the second straight month, according to the USDA Cattle-On-Feed report Friday, and anecdotal reports from the field indicate feed yards are getting backed up with potentially slaughter-ready cattle.

Feeder cattle markets have seen ample supplies go through the ring this month, relegating the newly weaned, fleshy or just off-colored cattle to the sidelines quickly, trade sources said.




Cash cattle markets this week are untraded through Monday, but late-week Christmas and New Year’s holiday weeks tend to get down to business early.  No bids or offers were reported, although asking prices were expected to surface near $162 per cwt on a live basis.

Cattle traded last week at $156 to mostly $157 live and at $249 to $252 on a dressed basis.  Both were down about $5 to $7 from the previous week.

Boxed beef prices were up with the USDA choice cutout up $0.79 at $239.36 and the select cutout up $0.34 at $230.22.  The choice/select spread widened to $9.14, although the weekly trend is narrower.

There were 98 loads of fabricated product sold into the spot market Monday, which is somewhat light.

The USDA reported that beef demand Monday was moderate against light offerings from the packer.  Ribs and loins were weak to lower while end cuts firmed – a seasonal tendency.