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The 2012 contracts continue to look more supportive than the 2011 contracts and February cattle closed sharply higher on the session yesterday to the highest level since April 5th. The August contract seemed to consolidate the recent gains with a tight trading range yesterday. The market faces a tighter supply situation into the 1st quarter of next year and on top of sharp year-over-year production declines, the market also faces a record drop in supply from the 4th quarter to the first quarter. August cattle traded around unchanged early in the session yesterday but saw improved buying into the mid-session to trade higher. The market is near the highest level since early May with a more positive tilt to cash markets and a positive tone for the economy helping to support. Feeder cattle pushed to yet another new all-time high to help support the market. Talk of steady to higher trade in the cash market this week after holding firm last week helped to support. The estimated cattle slaughter came in at 129,000 head yesterday. This brings the total for the week so far to 130,500 head, down from 261,000 last week at this time and down from 134,000 a year ago. Boxed beef cutout values were up 62 cents at mid-session yesterday and closed 58 cents higher at $179.18. This was up from $178.48 the prior week and is the highest beef market since May 5th. While the showlist is a bit larger for this week, traders see strong short-term demand for live cattle inventory from packers and there is a steady to higher tone for the cash market this week. The COT reports as of June 28th showed non-commercial traders were net long 58,335 contracts, an increase of 4,029 for the week. The buying trend is seen as a short-term positive force.
TODAY’S GUIDANCE: The market seems to have the short-term demand news to see the steady uptrend continue.
TODAY’S MARKET IDEAS: The close back over 112.63 for August cattle is impressive and leaves 115.05 as next good resistance. Support today is at 112.22. February cattle support moves up to 123.25, with 125.80 and 127.55 as next upside objective.
Cattle: Yesterday’s Reversal Could Attract Increased Technical Buying
by Terry Roggensack on August 26, 2011
Below is a sample of The Hightower Report’s 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 seems to have absorbed the weaker cash market news this week and traders may begin to consider supply and demand forces for September and beyond. Supply is likely to gradually decline into early next year but the hefty upfront supply of feedlot cattle has traders expecting larger production. Weights are still high and demand factors remain negative. Consumer sentiment readings are low and pork supply is clearly on the rise. This has traders questioning the ability of market to absorb near-term supply with current high beef prices. October cattle closed slightly higher on the session yesterday after first seeing prices erode to the lowest level since June 16th. With cash cattle down to $112.50-$113.00 this week and fears that beef prices might slide next week, sellers turned a bit more active with further weakness in gold and the US stock market early yesterday. However, the selling slowed as gold and then grains recovered from early lows. Higher trade in hogs and the outlook for a continued decline in poultry production into the 4th quarter were also seen as factors to provide some support to help the market recover from the early losses. Weekly U.S. beef export sales for the week ending August 18th came in at 15,600 metric tonnes, compared with the prior 4-week average of 15,775. Cumulative sales for 2011 have reached 610,300 metric tonnes, up 36.0% from last year’s pace. The estimated cattle slaughter came in at 129,000 head yesterday. This brings the total for the week so far to 510,000 head, unchanged from last week at this time but down from 517,000 a year ago. Boxed beef cutout values were up 53 cents at mid-session yesterday and closed 17 cents higher at $187.79. This was up from $186.60 the prior week. This is the highest it has been since April 20th, when it was trading at $188.89. Average dressed steer weights for the week ending August 13th came in at 846 pounds, unchanged from 846 the previous week but still up from 840 pounds last year. It is still surprising that weights have remained much higher than last year for much of the year despite high corn prices.
TODAY’S GUIDANCE: April cattle pushed down to the lowest level since July 1st and closed higher on the day. The reversal could attract increased technical buying. Beef supply will tighten considerably into early 2012.
TODAY’S MARKET IDEAS: October cattle resistance is at 114.85, with support at 111.35. Ideally, a break to 121.42 for April cattle looks like a good buying opportunity but the turn up yesterday could be a sign of a near-term low. Longer-term, April may test 130.