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The market is overbought and has absorbed significant new buying from funds and speculators recently but increased fears of a build-up in meat supply if exports slow has helped spark the long liquidation trend of the past few sessions. The cattle market pushed lower yesterday after choppy trade early in the session as the news of a tightening supply from the supportive USDA cattle-on-Feed report from Friday failed to provide for much support. Buyers are on the sidelines as traders remain concerned that domestic poultry supply will gradually swell due to the loss of exports to Russia and that the increased domestic supply will cause beef and pork values to slip. The estimated cattle slaughter came in at 124,000 head yesterday. This was down from 129,000 last week and down from 126,000 a year ago as this time. Boxed beef cutout values were up 23 cents at mid-session yesterday and closed 19 cents higher at $143.40. This was down from $145.71 a week ago. Cash cattle in Texas traded $.50-$1.00 higher on the week Friday at $86.00 and with feedlot supply at a seven year low; the short-term supply outlook is somewhat supportive. Placements of cattle onto feedlots in December were the lowest for the month since 1998. In addition, feedlots moved more cattle off of feedlots in December than expected at 103.5% of last year which means there were less cattle on feedlots to start the year and this was supportive to the February contract. Traders have assumed that the poultry trade with Russia would be resolved quickly but when talks broke down on Thursday with no progress, the market saw reason to sell. Ideas that the market is overbought and talk that the bullish USDA report was already priced helped pressure. The COT reports for the week ending January 19th showed an aggressive buying trend from fund traders. Trend-following funds (hedge funds) bought 17,181 contracts to increase their net long position to 56,558 contracts, a new record high for the data which has been released since January of 2006.
TODAY’S GUIDANCE: Once there is a stronger feeling that Russia will resume poultry imports from the US, the market will be in a position to move higher. However, futures remain vulnerable to a short-term sell-off. Given the overbought condition, new buyers might wait for a significant technical correction before entry. April cattle resistance comes in at 90.42 with 88.92 and 88.20 as next key support levels. Look for more weakness ahead.
Cattle Market Commentary – 2010.01.26
by Terry Roggensack on January 26, 2010
Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
The market is overbought and has absorbed significant new buying from funds and speculators recently but increased fears of a build-up in meat supply if exports slow has helped spark the long liquidation trend of the past few sessions. The cattle market pushed lower yesterday after choppy trade early in the session as the news of a tightening supply from the supportive USDA cattle-on-Feed report from Friday failed to provide for much support. Buyers are on the sidelines as traders remain concerned that domestic poultry supply will gradually swell due to the loss of exports to Russia and that the increased domestic supply will cause beef and pork values to slip. The estimated cattle slaughter came in at 124,000 head yesterday. This was down from 129,000 last week and down from 126,000 a year ago as this time. Boxed beef cutout values were up 23 cents at mid-session yesterday and closed 19 cents higher at $143.40. This was down from $145.71 a week ago. Cash cattle in Texas traded $.50-$1.00 higher on the week Friday at $86.00 and with feedlot supply at a seven year low; the short-term supply outlook is somewhat supportive. Placements of cattle onto feedlots in December were the lowest for the month since 1998. In addition, feedlots moved more cattle off of feedlots in December than expected at 103.5% of last year which means there were less cattle on feedlots to start the year and this was supportive to the February contract. Traders have assumed that the poultry trade with Russia would be resolved quickly but when talks broke down on Thursday with no progress, the market saw reason to sell. Ideas that the market is overbought and talk that the bullish USDA report was already priced helped pressure. The COT reports for the week ending January 19th showed an aggressive buying trend from fund traders. Trend-following funds (hedge funds) bought 17,181 contracts to increase their net long position to 56,558 contracts, a new record high for the data which has been released since January of 2006.
TODAY’S GUIDANCE: Once there is a stronger feeling that Russia will resume poultry imports from the US, the market will be in a position to move higher. However, futures remain vulnerable to a short-term sell-off. Given the overbought condition, new buyers might wait for a significant technical correction before entry. April cattle resistance comes in at 90.42 with 88.92 and 88.20 as next key support levels. Look for more weakness ahead.
Tags: Cattle, Livestock
About Terry Roggensack