Live cattle futures have been supported recently by a strong cash trade, rising consumer confidence levels, and technical momentum. Additionally, feedlots have become more current which is providing more pricing power. Cash traded $122/$123 late last week, and reportedly bids were $124 in the plains with offers at $125 an up.
Open interest is building, but the move higher this week has not seen strong volume. COT report based on positions through 01/17 showed high but not extreme net longs in the non-commercials. While the charts show a bullish formation spanning back to Oct/Nov 2016, the weekly and monthly futures continuation charts show the trade just over the lower quartile of a value area between 116.50 and 129.50. There is some fib resistance just under 127 and the EOD daily continuation area at 132.75. Dave Toth of RJO Market Insight identified 113.975 as the key corrective low the market needs to hold. His post from January 10th offered cautious bulls to go long under 118.50 OB.
The fundamentals are bullish overall, but current packer margins are in the red and monthly cold storage set an all-time record as of the end of December, which is not surprising given the large amount of production in 2016. While some of this is short-term bearish, the retail space should be able to have the margins to keep beef moving and slowly rebuild some demand.
The trade may be light going into Friday’s Cattle on Feed report. Contact myself or your broker for pre-report estimates or access through RJO Market Insight.
Live Cattle Feb 2017 Daily
Live Cattle Weekly Continuation
Live Cattle Monthly Continuation
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Senior Market Strategist
Follow Jeff on Twitter @RJOJeffGil.
Jeff began his career in 1992 as a runner at Geldermann Inc. After several years clerking in the corn futures and 30-year bond open-outcry pits, he made a transition "upstairs" as a broker at First American Discount Corp. After working five years with an upstart brokerage in Chicago, he joined MF Global in 2006. In November 2011, he moved to RJO Futures. He graduated in 1992 from Loras College, Dubuque, IA with a B.S. in finance.