Live Cattle Futures Commentary
Live Cattle (October)
It has been a race to zero between cash cattle and the board, today cash made another big drop with reports of 96 in the South and 97 being paid in the North by a major. The market managed to rebound mid-morning after this news crossed the wires. When the market breaks and rallies on bad news we view that as capitulation, a bullish sign in our view. We thought we had a chance at seeing that play out today, but the inability to hold the bounce into the close is keeping our expectations tempered. After the Tyson fire, we thought there would be a quick buying opportunity, but the lack of fund buying after such a fast and deep break raised caution flags for us. For several weeks now we have talked about the front months being vulnerable and the April contract being our bright spot, we continue to hold this belief and have added the June contract to our watch list.
Feeder Cattle Futures Commentary
Feeder Cattle (October)
On the feeder cattle side of things, we’ve been skeptical at best for some time. The market has not only struggled to rally on the back of corns big decline but has struggled to even hold contract lows. If the market cannot rally on what should be positive news, there’s something else going on. As mentioned in this morning’s interview with RFD-TV, maybe that “something else” is just money flow. Regardless of what it is, the path of least resistance has clearly been lower. We remain skeptical on feeders but do believe there will be a great buying opportunity at some point, but we would rather look long on strength than get stinky fingers (picking bottoms).
PM Boxed Beef / Choice / Select
Current Cutout Values: / 226.95 / 201.92
Change from prior day: / (.36) / (.02)
Choice/Select spread: / 25.03
Lean Hogs Commentary
Lean Hogs (December)
In last week’s reports and our “2 Minute Drill” we talked about 67.50 being a huge level, representing support in July and the breakdown point in August. That area has become the top end of the range over the last month and the inability to breakout last week led to a run at the bottom end of the range, 58-59. This has been a volatile and choppy trade for the last six weeks; we expect that to continue for the foreseeable future.