Ditching Red for Green Posted on 12/22/2014 by The Beef By Cassie Fish, CassandraFish At this time of year, red and green speak to the season, but CME cattle futures are taking them one at a time and after making new lows for the 4th quarter last week in a gut-wrenching rout, CME cattle futures prefer green today. In fact, lead month Dec LC has retraced all of last week’s losses, so far stopping at last week’s high on today’s rally. Futures may have made what is potentially a classic “V” bottom- a hallmark of cattle futures- along with the “distribution pattern top”. Overhead Resistance and Holiday Disruptions There are plenty of resistance points to choose from when predicting where futures will run into trouble on a rally. For the stalwart spot Dec LC, which has cleared the 100 and 40-day moving averages, $163.80 to $165 area is expected to meet renewed selling interest. CME cattle futures will close early on Wednesday and won’t reopen until 8 a.m. Friday, which will make when the cash cattle trade occurs even more interesting than usual. Packers have whittled through their high priced inventory and haven’t bought many cattle over the past several weeks causing most market watchers to conclude the packer will be in the market fairly aggressively between now and the first full week of January. Packer Need More Than a Few BOW_COMMERCIAL_PROTEIN_150x203_v2In fact, packers increased bids on fed cattle and Friday paid as much as $3-4 higher than the panic trade recorded last mid-week. Cash prices of $160 and $252 were reported in Nebraska on Friday. So even with this week’s well-advertised sub-400k head kill, slots must be filled in the schedule. Cash prices look to be headed back to test the $164 area, if not this week possibly next. Beef Cutout Bottoms as End Users Return The most positive news this morning is credible talk that beef end users re-entered the market on Friday, apparently convinced it was “safe” to come out after last week’s debacle. The beef cutout is expected to rebound quickly over the next few weeks. The degree of the rally will be closely monitored as traders attempt to gauge what kind of beef demand is on tap for January. Interesting COT as Commercials Get Long The CFTC’s Commitment of Traders’ report issued each Friday afternoon is the best glimpse into “who’s doing what” in these days of electronic trading. The report is through trading on Tuesday each week and last Friday’s report showed only commercials had the guts to buy the market on the break while everyone else abandoned positions. Commercials covered over 6k shorts and got long almost 8k cars, adding credence to a value being reached and an important low being made. The Beef is published by Consolidated Beef Producers…for more info click here. Disclaimer: The Beef, CBP nor Cassie Fish shall not be liable for decisions or actions taken based on the data/information/opinions.
Posted on: Mon, 22 Dec 2014 20:55:46 +0000
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