Cattle markets traded higher today on news that there maybe higher cash prices being traded in the mid to high $150s. With the cash cattle market likely to remain strong, especially if Plains states are hit with wintry weather in the near future, nearby futures look cheap from a historical standpoint. December futures ended the day about $3.00 below last week’s cash average, with the February contract discounted about 50 cents. That diverges from the historical pattern in which early winter prices routinely average about $3.00-$4.00 over those seen in late November. In my opinion, the technical analysis of the fat cattle market may turn bullish if there is follow through buying tomorrow. Today’s high marked initial resistance at $156.10, but a push above that level would have bulls targeting overhead resistance between last week’s high at $156.95 and the Oct. 27 contract high at $157.225. A close above that zone would have bulls targeting $160.00. The market seemed to have enough strength today after the relative slowdown from Monday and Tuesday that could indicate a reversal in live cattle. I still believe that we will see consolidation in the near term that eventually could lead to a mid-term reversal, but we shall see. Choice beef cutout values fell $2.51 early today to $252.23, indicating packer margins are still being squeezed. Meanwhile, the ongoing cyclical liquidation of the U.S. cattle herd is steadily reducing the supply of yearlings available to feedlots, although supplies are likely comparatively large on a seasonal basis as the spring 2021 calf crop reaches marketable age. Dryness across a sizeable portion of cattle country from Texas to Missouri may also be forcing lots of young animals onto the market due to a shortage of hay for winter feeding.
The USDA estimated cattle slaughter came in at 128,000 head yesterday which brings the total for the week up to 256,000 which is down from 257,000 from last week but up from 245,000 from a year ago.
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