August Live Cattle ended the week with a powerful surge, closing at a new all-time high for the lead contract at 180.175. After trading to an all-time high for the lead contract (181.175) on Wednesday and failing, creating a Bearish in the process, Thursday looked like there would be follow through to the downside. It traded down to 175.20 and looked weak. But bulls stampeded and price rallied into the close and Friday’s action gave a little head-fake to the downside on the open, making the low at 176.775 and then took off. A little mid-session consolidation and then straight up till the very end of the session, actually making the high after the settlement at 1pm CDT. This puts the bears on notice as a failure in the bearish pattern could create another run for the bulls. Packers were able to get some cattle bought cheaper early in the week in the south, but cash continue to strengthen as the week wore on and with most of the trade occurring in the north, the 5-area weekly average looks higher than last week’s average. This puts futures above the lower end of the trade so, in my opinion traders are expecting the south to catch up to the north in price as grading seems to be equalizing as packers have been buying cattle at any weight and the choice/ prime content has been in decline up north where cattle are fewer in number. The choice/ select spread is wide indicating a shortage of quality cattle and beef, in my opinion. Cutouts have weakened so packers are probably crying in their soup, but the load counts have swelled as the price fell. Could this mean packers have more orders to fill going forward and are short cattle? We’ll see… Exports have been a sore point for the industry, but the Dollar has weakened, and cutouts are lower. Could we be in for a surprise going forward? Stay down Dollar! This could bring more opportunities for producers. Guys are still fearful of the packers and their ability to gain control of the price action. Slaughter is minimal for Saturday, keeping production down. It hasn’t helped cutouts as retailers have pulled back and are getting lower prices as a result. Tough times for the packing industry…. This could be good for the consumer as price could remain reasonable in the grocery stores. If settlement hold, we could test the all-time high at 181.175. Resistance then comes in at the daily R1 at 181.54 and then the Weekly R1 at 182.60. A failure to hold settlement could see a setback to support at 179.40. Support then comes in at 178.10.
Boxed beef cutouts were lower as choice cutouts decreased 0.97 to 305.94 and select collapsed 3.57 to 276.61. The choice/ select spread widened and is at 29.33 and the load count was 136.
Friday’s estimated slaughter is 121,000, which is below last week’s 125,000 and above last year’s 120,000. Saturday slaughter is expected to be 8,000, which is below last week’s 78,000 and last year’s 54,000. The estimated total for the week (so far) is 633,000, which is above last week’s 539,000 and below last year’s 673,000.
The USDA report LM_Ct131 states: So far for Friday in Nebraska and Western Cornbelt negotiated cash trading has been slow on light to moderate demand. In the Western Cornbelt, compared to the last reported market on Thursday, live purchases traded 1.00 lower from 183.00-186.00. Not enough dressed purchases for a market trend. Last week dressed purchases traded at 290.00. In Nebraska, a few, live and dressed purchases traded at 186.00 and at 291.00, respectively. However, not enough purchases for a market trend. For the prior week in Nebraska live and dressed purchases traded from 183.00-186.50 and at 290.00, respectively. In the Southern Plains negotiated cash trading has been inactive on very light demand. Not enough purchases for a market trend. Last week in the Southern Plains live purchases traded at 178.00.
The USDA is showing cash trades for live cattle from 175.00 – 186.00 and from 285.00 – 295.00 on a dressed basis (so far).
August Feeder Cattle bounced back on Friday in spite of strong corn prices as cattle prices surged, providing the lift for Feeders. Feeders traded from a low at 244.00 to the high at 447.15. It settled at 246.65. The bounce off the low was the second successful test of support at the 13-DMA now at 244.65. Holding support lead to the breach of resistance at 245.75 and with settlement above this level, puts resistance at 248.85 in traders’ crosshairs. Don’t forget Feeders behaved the same way the fats did on Wednesday. It surged to its brand new all-time high for the lead contract at 251.30. It collapsed and set back to test support. If corn weakens, Feeders could revisit the all-time high. In fact, 248.85 was a new high previously set on July 5th. There has been a lot of bullish surprises in the cattle markets. Strength in corn and some consolidation in cattle could see price revisit the 13-DMA. Next week could be interesting.
The Feeder Cattle Index decreased and is at 239.45 as of 7/13/2023.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursdays (except holiday weeks) and our next webinar will be on Thursday, July 20, 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.
**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
888.391.7894
Fax: 312.256.0109
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