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Cattle futures look for price direction

Consolidation trade likely as fundamental news is weighed.

Like many commodities, cattle futures suffered a dramatic price fall during the month of March due to COVID-19 demand fears and processing plant closures. Since that sell off, cattle futures have traded in a modest uptrend that began in early April.

Looking at the October contract, the low on April 3 was 84.87, with the recent high of 107.22 posted on July 16. For the short term, October futures prices seem likely to trade in a narrow consolidation pattern between 101.00 and 107.00.

Over the coming weeks, the market will weigh various fundamental aspects before committing to a new price trend for direction.

Cattle on feed

The most recent cattle on feed report was considered neutral against expectations.  Total cattle on feed as of July 1st was 100% of last year’s at 11.438 million head. Marketings were 101%, which was expected. Placements came in at 102% while the expectations were for 103.8%.

The resounding theme of the report is that there a large supply of cattle that are lingering in feedlots. According to the report, the number of cattle on feedlots for 90 days or longer came in at 5.7% above last year.  Also, the supply of cattle on feed for more than 120 days is up 16.3% from last year.

These are negative price factors for the short term as it is viewed that there will be ample supply coming into the market.

Boxed beef and cash markets

Over the past five days Boxed Beef values have been steadily improving, which suggests that demand remains strong. Light trade took place across the South on Tuesday at $97 to $97.50 per cwt, which was $1 to $2 per cwt higher than last week. Cash cattle trade has improved, yet currently the October futures contract is trading at a premium to the cash market. Normally this time of year, the futures trade at a discount to cash.  Many are eagerly watching: Will cash trade continue to improve? Or will the futures price soften?  

Seasonals

Seasonally, there is a strong tendency for October cattle futures prices to slide lower during August. That decline is usually met by a rally higher into contract expiration.

Should a seasonal price slide lower occur, it will likely be met by increased export demand. This would be beneficial as May beef exports were viewed as lackluster. Beef exports in May totaled 188 million pounds, down 31 percent from a year-ago.

The U.S. Dollar continues to slide lower, and that supports exports. Many factors are being weighed and measured for cattle futures at the moment. Trade will likely monitor the above aspects closely over the coming weeks. Should support break on the daily October live cattle futures charts, prices might slide back down to the April price lows. Have a marketing strategy ready.

Reach Naomi Blohm: 800-334-9779 and naomi@totalfarmmarketing.com

 

Disclaimer: The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation

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