The Cattle Range Home Page
November 7, 2017
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Fed Cattle Market... Consolidation

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Fed Cattle Market... Consolidation
Cassie Fish -- cassandrafish.com

Last week, CME cattle futures made life-of-contract high after a two-week run up. Such a move placed futures in an over-extended state technically and so far, this week, the market has seen fit to take a rest and consolidate. In fact, this is the best technical correction since mid-October. The fund roll also continues to dampen advances in the Dec LC and by week’s end, Feb LC will carry the most open interest as Dec LC takes the back seat.

In the country, a few bids have already surfaced, Corn Belt packers floating $190, $1.50 under last week’s average and well below the $198 outside top. While in the Plains, one major bid $124 in Colorado, $1 under last week’s practical top. CME cattle futures seem oblivious to the stirrings in the country however, at least for now. Cash looks to be steady at worst and $1-2 higher likely.

Some trades, wary of a top, are troubled by the basis convergence of futures and cash. But a rally like this- and plenty of time left on the holiday clock- makes a bang not a whimper more likely for the culmination of this move. Cash is known to outrun futures by considerable amounts historically before topping. Further, cash just took out major overhead resistance last week and little resistance exists on the cash chart until the $130 area.

There is a rumored cooler cleaning this week as well as a couple of Saturday shifts that have been pulled which ought to bring this week’s slaughter down to 628k to 632k. Boxed beef prices will benefit by the kill cuts and are expected to move higher over the next 2-3 weeks, with choice approaching and maybe surpassing $220.

Updated Grading Data 

The USDA released grading data from the week ended October 28 today, which included about 2.5 days of slaughter following the recalibration of the quality grading camera at some fed plants was performed. Compared to the prior week, choice grade dropped 1.39%, prime grade dropped 0.47% and the +choice declined 1.9%. Grading is still at or near record all-time highs.

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