The Dec cattle market looks to continue to push lower over the near-term as the wide December basis, the overbought technical condition, and an adjustment down due to bearish USDA reports help to pressure the market. Dec cattle opened sharply lower yesterday off of the bearish news from the Cattle-on-Feed and cold storage reports, and the selling continued to drive the market to limit down into the close. Fears that the large premium of December to the cash market will encourage extra feeding, which will boost short-term production is seen as a bearish force as well. Furthermore, news that there was a major jump in heavier-weight feeder cattle placed in August was seen as a particularly bearish set-up. The USDA estimated cattle slaughter came in at 118,000 head yesterday, which was up from 112,000 last week and from 112,000 a year ago at this time.
DEC CATTLE: The market definitely has several short-term bearish forces, but the recovery in beef and cattle off the recent lows is somewhat positive. The drop reverses the short-term trend down. An inability to back fill Monday’s gap lower will encourage selloffs to 113525* support. A close under 113525* is bearish for declines into the 112-11100 time. A close over 116475* is needed to rekindle bull forces. I recommend looking for a setback with 113.52 and 112.25 as next support.
Dec ’17 Live Cattle Daily Chart