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What is Next in the Live Cattle Market?

by Archer Financial Services | Jun 29, 2017
By Dennis Smith 
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LEAN HOGS

Cash was called lower yesterday but instead came in fully steady. Packers are ripping the hog producers off right now with cutout soaring higher and adding pure profit to their margins. Perhaps the cash will take a huge jump after the hog & pig? If it does July futures are severely undervalued. Despite the rally in July futures yesterday, closing up 145 points, they remain 350 under the cash index. Volume of trade yesterday was reported at 42,000 with open interest up 371 cars. Look for more of a choppy two-sided affair today ahead of the hog & pig. The estimates are pretty negative at 103, 102 and 104. Who knows until the numbers come out but I’m not convinced the kept for breeding will be up 2% from last year. 

  

LIVE CATTLE

Both LC and FC tested support yesterday, held and then closed higher. Consider the technical pattern negative and consider the fundamentals negative. This would suggest that a test of resistance will fail. Resistance in Aug FC is 15000 and resistance in Aug LC is 11800. The cash steer trade was lower yesterday with reports of NE trade at $191, down $4 to $5 from last week with IA trade at $1.18-$1.19 ½ and at $190-$191. The beef is falling like a stone. The slaughter is not falling but remains large and should stay large as numbers increase. In feeders, reports of wild prices being paid for animals in NE auctions supported the board. The JBS Five Rivers Feedlots are looking for a buyer. I suspect Monday’s limit up performance was focused on a possible successful sale whereas the massive selloff on Tuesday was focused on the bearish live cattle fundamentals. When the Chinese bought Smithfield the hogs did not rally sharply. U.S. beef to China is real but will it ramp up in meaningful quantities yet this summer? I doubt it. Maybe the deferred LC contracts gain on the Aug? I have no new recommendations other than let the market action do the talking. 



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The risk of loss in trading futures and options on futures can be substantial. The author does not guarantee the accuracy of the above information, although it is believed that the sources are reliable and the information accurate. The author assumes no liability or responsibility for direct or indirect, special, consequential or incidental damages or for any other damages relating or arising out of any action taken as a result of any information or advice contained in this commentary. The author disclaims any express or implied liability or responsibility for any action taken, which is solely at the liability and responsibility of the user. In addition, the author of this piece currently trades for his own account and may have financial interest in the following derivative products: (corn, soybeans, soybean meal, soybean oil, lean hogs, live cattle, feeder cattle).

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