Cattle Market... On the Run
Cassie Fish --
cattle feeders started the momentum change earlier this week and CME live
cattle futures have followed ever since. Most active Feb LC, standing with
131,063 open contracts, is failing fast. Having made an all-time high this
week and taken out last week’s lows, a weekly key reversal has been made.
The well-known monster long fund position in cattle futures now enters
as a potential ticking time bomb, if and when the decline in futures continues.
most cattle traders is Jun LC, within a buck of lead option Dec LC, which
makes zero sense fundamentally, but is a great example of how money flow
matters most. Jun LC started this morning par with this week’s weakest
cash trades, despite the fact that the largest fed cattle supply in 2018
will begin to surface then.
is longer-term bearish market psychology that has dominated this week.
Nothing fundamentally has really changed in the broader scope. In fact,
October actual fed slaughter data has come in higher than estimated, just
one more fact that the front-end market-ready cattle supplies are current
and the rally in cash prices that occurred in November was the result of
packers’ desire to continue to kill big coupled with that currentness.
paying up for cattle 2 weeks in a row did get the packer in better inventory
shape and allowed leverage to swing back in his favor, perhaps even more
dramatically than anyone realized Monday morning.
this is all yesterday’s news and it’s evident that fear of what is to come
post the Q4 high in cash cattle and cutout values is greater than all else.
cattle kill forecasts for the remainder of 2017 show kills, based on supply
data ought to drop below 495k head for the first time since April and stay
below 490k until April 2018. The fed kill has been at 495k per week or
higher since late April. It is also accurate that fed cattle supplies will
be larger than last year from mid-December onward, but not dramatically
so until Q2.
is early for the Q4 rally to be over seasonally and another run-up in prices
could occur before December, but most aren’t counting on it now.