RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Cattle futures collapsed following the most recent COF report and after a brief technical bounce resumed the bearish trend started in early June. Futures has experienced failing momentum alongside lower highs and as of today lower lows.

Cash in fed cattle recently traded around 115 so the basis is attractive for feedlots to keep marketings flowing. August LC futures is currently trading sub 110.

The current weakness is not surprising given the historically large number of placements this spring through June, but what is surprising was and is the funds stubborn longs that leave cattle futures vulnerable for a potentially severe washout.

I have noted the 135-145 levels in Feeder Cattle were good lines in the sand or strike levels for those still holding product to use to hedge below. You are chasing it a bit now, so after today’s break of new lows you may see a bounce in 2-4 days back up to 144 to use as a resistance level.

Funds are still stubbornly long, and my guess is that 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 maybe 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 135 in feeder cattle futures as key underlying support.

Oct ’17 Live Cattle Daily Chart

Oct '17 Live Cattle Daily Chart

Jeff Gilfillan