Commentary: April Live Cattle came out of the corner throwing punches as it gap opened higher and tested resistance at 112.35 making the high at 112.65. Well, it tired itself out and broke down closing the gap and trading to support at 109.60, making the low at 109.50. It settled at 110.10. The Equity markets were strong as the livestock markets opened as early excitement over a surprise 50 basis point cut in interest rates drove markets higher. The excitement waned and equity markets crashed and cattle seems to be trading with the equity markets. A strong equity market sees a rise in price and a breakdown in equities leads to a decline. I believe the feeling is a decline in the equity markets will lead to less consumption of beef and a rise will keep demand strong. The beef market hasn’t shown any issues with demand however, as cutouts have stabilized and the seasonality of beef should see a rise in cutout prices going forward as retailers prepare for grilling season. Slaughter levels remain elevated as it has been higher than last year at this time period and this week so far is 7,000 over last year’s pace. With weights higher than last year production is high. Price in beef cutouts hasn’t collapsed below 200.00 for choice with all this production. I think that is a positive sign. Packers and retailers are reaping the benefits of traders’ nervousness, while producers suffer. It doesn’t help when packers only have to bid on a limited number of cattle to price a lot of committed cattle, in my opinion. Resistance is at 110.80, 112.35 then the 200 DMA at 113.18. Support is at 109.60, 108.65 and then 107.30. Cash trade was at a standstill on Tuesday. Boxed Beef cutouts were higher on moderate demand and light to moderate offerings. Choice cutouts increased 0.09 to 206.62 and select was up 1.54 to 202.70. The choice/ select spread narrowed to 3.92 and the load count was 155. Slaughter was estimated to be 124,000.
Trade Suggestion(s):
N/A today
Risk/Reward:
Futures –
Options –
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursdays and our next webinar will be on Thursday, March 5th at 3:00 pm. It is free for anyone who wants to sign up and the link for sign up is below. If you cannot attend live a recording will be sent to your email upon completion of the webinar.
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Ben DiCostanzo
Senior Market Strategist
Walsh Trading, Inc.
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