Large Placements and Cattle On Feed Keep Livestock Under Pressure

by Jeff Gilfillan
July 26, 2017 3:19PM CDT

Last Friday’s Cattle on Feed report was bearish overall and markets created a gap lower on Monday morning. COF was up 4.5% from the prior year and the third highest level on record. While the supply is bearish, the front end supply still remains current reflecting robust demand and strong marketings. Marketings were up 4% YOY. The big surprise was the high level of placements reported for June. Placements were up 16.1% YOY which is the fourth highest June placement on record.

The charts are bearish. We are seeing lower highs on the daily, RSI is drfting lower and some EW analysts including RJO’s Dave Toth consider July’s rally as a 3 wave corrective rally. 

My value range in fed cattle remains in tact (106-118 to 125-127), and I repeatedly see little fundamentally for this LT value area to be breached anytime soon. There are several gaps to fill in front month fed cattle futures (119, 124.50 then 127.10). The shakeout areas are 125 then 128.50 in LCQ7. In feeder cattle the sub 140 area and 135 areas are key supportive areas that maybe good lines in the sand for those looking to hedge a break below.

Funds are still stubbornly long and my guess is this will continue unless we see a sustained trade below July lows or a repeat break of the transitional zone (108-112) to the downside in fed cattle futures front month. If the LC does washout consider a long from 104-106 area. We may not see this until September, but it may be a good time to set some alerts.

Repeatedly, this is a good market for hedgers on both sides of the trade. Have a plan and keep an eye on 112 in live cattle futures and 135 in feeder cattle futures as key underlying support.

 

Live Cattle Weekly Chart

Live Cattle Weekly Chart

Source: TrackN’Trade

FREE $100K FUTURES
DEMO ACCOUNT

800-441-1616

Contact Us

RJO Futures | 222 South Riverside Plaza, Suite 1200 | Chicago, Illinois 60606 | United States
800.441.1616 | 312.373.5478

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that RJO Futures believes to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgement at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.

Distribution in some jurisdictions may be prohibited or restricted by law. Persons in possession of this communication indirectly should inform themselves about and observe any such prohibition or restrictions. To the extent that you have received this communication indirectly and solicitations are prohibited in your jurisdiction with registration, the market commentary in this communication should not be considered a solicitation.