Fed cattle had a good week on the futures and the cash markets. Cattle started trading in Kansas early in the week at $103, $3 higher than last week. Then Texas started trading at $104 and late in the week Northern Plains and the western Corn Belt held out and traded between $106-107.
Futures markets followed the fed cattle trade and gained several dollars for the week. Friday’s close on August live cattle was $107.60, 50 cents higher, and October closed at $110.22. Feeder cattle had a tougher week and started getting resistance at the $147 area. August feeders closed at $143.92, down $1.02 and September feeders were off 80 cents to close the week at $146.57. It feels like feeder cattle are topping out a bit. But cash sales in the country are seeing 750-lb. feeder steers trading in the $150 range. The latest CME feeder index was $143.10.
ShayLe Stewart at DTN reported, “Countryside prices urged the board to trade higher as feeder cattle sales continue to be well tested and met with excellent demand. But the fundamental pressure of moving the complex even higher seems like too much for traders to bite off right now.”
Today’s estimated slaughter was 112,000 head for the week. On Friday 573,000 head were processed, which was 2,000 head short of the same week last year. The beef market was much stronger. The Choice cutout gained $3 today to $214.24 and Select was trading at $199.29.
Cassie Fish at The Beef believes “Aug LC may be overbought but it made a new high for move today and continues to gain on all other contracts. Aug LC is holding its premium to cash prices, which will average nationally around $105 because most cattle in the 5-area average that trade live are in the South where $105 is the top. The South has made progress in getting cleaned up the last couple of weeks.
“In what remains of this week’s cash trade, two major packers are bidding in $168 in Nebraska, $2-3 higher than last week’s practical top. Most feeders are priced at $170, which would be par to Aug LC. Trade volume thus far has been under 10k head in Nebraska that almost always trades more than 20k a week,” she reported.
“Aug LC is in its own bubble, with 11 days until expiration, tiny open interest and expectations of higher cash cattle and boxed beef prices all contributing to its strength. The Aug/Oct spread at 290 points discounts, could move to 200 discount by expire. It’s been 19 weeks since futures bottomed and the uptrend continues, Aug LC today finally trading into the gap left last February at $108.25 to $107.92.
“Next Friday’s USDA Cattle-on-Feed report will show placements up big and the number on feed larger than a year ago, but that is only inspiring hedging in the deferred months, mostly Dec LC and beyond.” — Pete Crow, WLJ publisher
