Monday markets
At the CME it was a disastrous day in the futures markets with all contracts going red. Live cattle were off $2-3 and feeders were down $3-5 with the new expanded trading limits. Live cash trade started today in Texas at $106. A total of 14,911 head traded hands on the negotiated cash trade market; prices ranged between $103-106 and dressed trade was at $165-166. A positive basis motivated early trade.
The live cattle contracts were all down. October was off $3.15 to $104 and December down $3.47 to $105.15. Feeder cattle contracts took the big hit with October down $3.50 to $134.60 and November down $4.95 to $130.07; a perplexing day at the CME. Last week’s cash trade was 111,123 head at mostly $108 live.
Cassie Fish, market analyst at the Beef, describes today’s futures action, “The sharp decline and massive liquidation experienced by CME live cattle futures last week is continuing today more intensely. Last week LC futures lost 15k in open interest and declined 400 points only to add another 300 to that loss today in dramatic and intimidating fashion. Cattle open interest for October is its lowest since October 2016.
“Last month’s lows did not hold. The market is trading under all moving averages even as the market becomes more oversold. And most importantly Oct LC is discount to cash and most active Dec LC is discount to today’s $2 lower cash trade in Texas of $106 on 2500 head. The north has sold at least 3300 head at $105. Bids of both $165 and $166 have been noted north. In the north, the three major packers are buying for kill slots in November. A favorable basis is the motivation for selling cash cattle today at lower money.
“Most active November feeder cattle futures locked down its new $5 limit at $130.02, almost $10 discount to the CME feeder cattle index. No one seems to be able to explain why there has been 6 days of aggressive selling in cattle futures while other ag markets are faring much better. There certainly isn’t a slew of new bearish cattle news to send everyone screaming to the exits.”
Slaughter levels have been robust with last week’s slaughter at 654,000 head. Beef markets are slightly lower with Choice boxes at $209.44 and Select down to $191.84 on 114 loads.
The folks at the Cattle Report were looking forward into feeder cattle markets, “Higher grain prices, increasing drought areas of the country, and crashing futures are troubling the stability of the cash markets in replacement cattle. The USDA corn stocks report followed by a reduction in corn acres has moved the corn above $4 bringing with it a higher basis in the southern plains.
“Additionally, continuing drought in the southwest is causing some liquidation and premature selling of cattle. Winter grazing areas now are facing the possibility of fewer grazing opportunities. Buyers will be cautious proceeding with purchases in the coming weeks.
“Placement levels over prior years has slowed during the past few weeks. Cattle owners are not yet willing to accept materially lower prices even though some have few options. Stocker operators with calves on hand for winter grazing are looking at losses to forward sell cattle for spring or hedge a drastically lower board price. Buying more calves to average down is sometimes an option but this requires having a spot to graze the new purchases.”
Oklahoma National Stockyards in Oklahoma City offered 69,800 head today and reported, compared to last week, feeder steers $3-8 lower; feeder heifers $1-$5 lower. Demand moderate for feeder cattle with cattle futures trading sharply lower. Steer calves steady on improved quality. Heifer calves steady to $3 lower. Benchmark Steers weighing 785 lbs. averaged $132.85. — Pete Crow, WLJ publisher
