Welcome to the beginning of 2019’s bear market. Just about everything in last week’s market tipped into the red and suggested the future is looking down.
“After an almost 12-month-long uptrend on the weekly charts, CME live cattle futures topped last week and have begun the next leg of the long-term bear market,” announced Cassie Fish of the Beef Report on the morning of March 27.
She noted that the April live futures contract was running “well under its 40-day moving average” and that the June contract is coming very close.
By close of trade Thursday, the April contract had lost over $3 and the June contract had lost almost $4 with settlements of $126.53 and $119.63 respectively.
The live cattle futures weren’t the only things to lose over $3. Negotiated cash fed cattle trade got started early last week. By Thursday afternoon, over 72,500 head had been confirmed sold for the week at $125-128 (average $125.54) live and $205-206 ($205.94) dressed. These averages were down $2-3 compared to the prior week’s, and down in spite of early-week expectations of steady to higher cash trade.
“The cash uptrend, which was initiated at the end of June last year at $106, is on the verge of turning ‘down,’” noted Andrew Gottschalk of Hedgers Edge on Thursday morning.
“What may have changed producers’ attitudes towards selling? With the sustained adverse feeding conditions this winter, many front-end fed cattle will simply no longer perform. As such, it is better to unload these cattle and replace them, rather than trying to hold. The marginal gain cost for maintaining these cattle may exceed the selling price of fed cattle.”
The Choice cutout also lost ground last week, but not to the same extent as cash fed cattle. At $227.44 on Thursday, it was only down about $1.50 from the prior Friday. Select was up almost $1 compared to the prior Friday close with $219.52.
“The kill this week and next week is expected to be 625k to 630k head, just under last week’s 631k, as slaughter finally begins to pick up,” reported Fish.
In what is likely good news for cow-calf producers, but bad news for feeders and backgrounders, large feeder cattle auctions were mostly selling cattle for steady to higher money last week. Both the Hub City Livestock Auction in South Dakota and the Huss Platte Valley Auction of Nebraska set the high with advances of up to $9 on some classes of feeders. In general, midweight steers and light-to-midweight heifers saw the best advance.
Prices on medium and large #1, 7-weight steers ranged from the upper $130s to the lower $150s. Outliers on the upper end were found at Hub City Livestock Auction where a 83-head lot of 718-lb. “thin fleshed” yearlings averaged $171.25, and at the Huss Plate Valley Auction where a 220-head lot of 734-lb. yearlings got up as high as $159.85.
Near-term feeder futures also lost ground last week, but not to the extent of live futures. With the March contract settling at $141.98 and the April contract settling at $145.95, the contracts lost about $1 and $3 over last week respectively. — Kerry Halladay, WLJ editor
