Cattle Markets Collapse

Ben DiCostanzoGeneral Commentary

January Feeder Cattle gap opened lower, made the high of the day at 242.325 and fell apart. It crashed and kept on spinning out of control until the end of the session, making the low at 235.30 and settling at 235.70. The gap is from the Monday high to the Friday low at 242.65. The cash market has been falling back as feedlots are pulling back on their desire to pay up for yearlings. The Cattle on Feed report was considered bearish and bulls bailed as the decline gathered steam, creating more downward pressure. The floodgates were opened and support levels were eradicated. The low and settlement was just under support at 235.95 and bearish traders now have the 200-DMA on the continuous chart at 226.525 in their sights. Follow-through to the downside will face support at 234.475 and then 233.10, 229.825, 228.05, 227.80 and 226.925 before the rising 200-DMA. If price can overtake 235.95, resistance will be at 237.25, 238.35 and then 240.875.

The Feeder Cattle Index decreased and is at 243.56 as of 10/20/2023.

December Live Cattle gap opened lower and plunged. The high was the opening price at 183.65 and the gap is from the open to Friday’s low at 184.425. The breakdown took price nearly down the limit for the December contract and down limit for the February contract. There will be expanded limits on Tuesday of 10 handles. Once again, the Cattle on Feed set the stage for the crash, as the on feed, placements and marketings all came in outside the expectations of analysts. The Cattle on feed report out after the close showed the on-feed figure to be at 101% of last year, placements to be 106% and marketings 89%. It seemed like the market had the feeling the on feed report would be bearish with the selloff on Thursday and Friday before the report. This wasn’t enough as futures crashed through support at the 50-DMA (184.675) and then the 100-DMA (180.775) on its way to the low at 178.175. The decline stopped just short of support at 178.10. Settlement was at 178.35. The collapse gained steam with bullish traders flailing and liquidating deteriorating positions and technical selling as the market burst through support levels. The placements and marketings implied there are more market ready cattle in feedlots, indicating the packer’s slowdown in slaughter this year is working, that is the feedlots are finally full ( at least above last year for the first time in a while). It hasn’t helped them gain control of price, however as last week prices averaged at 186.15. This puts last week in the top 10 on prices paid for steers. This week even with the crash has seen trading from 180.00 to 185.00 on a Monday. Cash hasn’t crashed, yet… Cutouts are stable at just above 300.00. Producers see this and will do their best to ignore the futures price collapse. If futures hold above 178.10, a test of resistance at 179.40 is possible. Resistance then comes in at the 100-DMA and then 181.175. A failure below 178.10 could see price pressured and test support at 175.95. Support then comes in at 174.425.

Boxed beef cutouts were mixed as choice cutouts decreased 0.84 to 304.54 and select increased 2.32 to 281.02. The choice/ select spread narrowed and is at 23.52 and the load count was 105.

Monday’s estimated slaughter is 125,000, which is above last week’s 124,000 and below last year’s 126,000. Saturday slaughter is expected to be 18,000, which is above last week’s 6,000 and below last year’s 42,000. The estimated total for the week (so far) is 638,000, which is above last week’s 617,000 and below last year’s 675,000.The USDA report LM_Ct131 states: So far for Monday negotiated cash trading in the Southern Plains and Nebraska has been mostly inactive with very light demand. Not enough purchases for a market trend. Last week was the most recent market in these regions. In the Texas Panhandle live FOB purchases traded at 185.00. In Kansas live FOB purchases traded from 184.00-185.00. In Nebraska live FOB and dressed delivered purchases traded from 186.00-187.00 and at 294.00, respectively. In the Western Cornbelt negotiated cash trading has been slow on light demand. A few live FOB purchases traded from 184.00-185.00, however, not enough for a market trend. The most recent reported market was last week with live FOB and dressed delivered purchases traded from 186.00-187.00 and at 294.00, respectively.

The USDA is indicating cash trades for live cattle from 180.00 – 185.00 and nothing on a dressed basis (so far).

For those interested I hold a weekly livestock webinar on Tuesdays and my next webinar will be on Tuesday, October 24, 2023, 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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**Call me for a free consultation for a marketing plan regarding your livestock needs.**

Ben DiCostanzo

Senior Market Strategist

Walsh Trading, Inc.

Direct: 312.957.4163


Fax: 312.256.0109

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