Last week we noted our original $78 per pound expiration target for summer futures would need to be raised up to $80. It was still a bearish price forecast compared with prices at the time was simply was not as bearish as it could be.
With the follow-through selloff in live and feeders today, every producer is bracing for a return to 2015. Technically, neither market is suggesting that. What they are suggesting are selloffs comparable to the one seen in either early January or late January of this year. Why? The market has technically changed since early last June, and even before that.
It was impressive to see live cattle futures hold onto these higher prices, despite the fact that cash cattle trading late last week was disappointing. At today's April futures settlement, cash should have traded at $139 last week and again this week. In fact, at today's settlement these futures are implying cash will trade at $140 and $141 from now through April. Last week's trade was at $138.
We should see slaughter levels very close to last week's number this time around. There will be moderate bump up in two weeks as packers prepare for the holiday reduced numbers at the end of the month.
The seasonal is for the cash cattle to hold from a peak until the first week of April. Futures have a different seasonal though. They have a typical peak on March 4. For the April the seasonal break goes until March 17. On the June the break typically lasts until April 21. We suggest this year's pattern will follow the seasonal.