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Swift's Market Comments

Bears still dominating the cattle markets

Bears still dominating the cattle markets
Consumer demand and inventory movement will be keys to turning the market bullish.


Live cattle buyers are few and skeptical this morning. A reversal of psychology is needed to relinquish the grip the bears have. That will only come from keeping the pipeline moving with inventory.

When this psychology is turned, I anticipate fewer sellers to absorb their buying back of shorts, as well as an anticipated increase in buying because of the supply not being as burdensome as many perceive.

In my opinion, the increase in beef production is not nearly as large as the reduction in consumer consumption. Rebuilding consumer demand is going to be tough. However, it has been done before, after the BSE debacle and other negative factors that have surfaced through the years.

On the October live cattle chart, $103.77 is the first target for a turnaround, with a move above $105.25 to set the stage for a real reversal.

An issue has been though that consumer demand had yet to increase to a previous level prior to one of these events. So, after this event of higher trading and now lower trading, I would anticipate the consumer to continue to increase consumption, but not to any previous level as before. Hence, a need to attempt to grow a herd to meet that anticipated demand. 

To begin moving higher in earnest and begin boiling the bear out of the pot, October fats need to exceed $103.77. This is the low from the Aug. 30 trade. That was the day that started off sharply lower and ended up limit. To penetrate that low would begin to suggest a reversal.

The next step is going to be not too far from that. A trade above $105.25 October would set the stage for a reversal. This was the previous contract low prior to the Aug. 4 high. Only the $103.77 is in the sights today and it is perceived a long shot to be exceeded today. 

An investment in futures contracts is speculative, involves a high degree of risk and is suitable only for persons who can assume the risk of loss in excess of their margin deposits. You should carefully consider whether futures trading is appropriate for you in light of your investment experience, trading objectives, financial resources and other relevant circumstances. Past performance is not necessarily indicative of future results.

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