August Feeder Cattle opened lower, and broke down to the low at 251.90. The opening breakdown tested support at the rising 50-DMA now at 251.85 which contained the selling with price rallying to the session high at 255.95. The rally stalled below resistance at the declining 8-DMA now at 256.325. The range was in place by mid-morning, and it pulled back to test the key level at 254.30 and then settled above it at 254.925. The rally also closed the gap created on Wednesday into Thursday, from 254.225 to 253.85, settling above the gap. The price action also formed a Bullish Engulfing candle with the Friday open – close engulfing the Thursday open – close. This occurred at the low of the recent down move so could lead to a retracement in Feeders. The pattern holds until the Thursday low is taken out at 250.80. The Feeder index has been on solid ground this week, consolidating just und 251.00 and then the Friday print out after the close makes a new high at 151.20. This is on course to challenge the all-time high set in September of 2023 at 254.10. Futures are now tight to the index and with the Bullish pattern could see futures increase their premium to the index next week in my opinion. We’ll see!… A failure from 254.30 could see price test support at 252.35. Support then comes in at the rising 50-DMA. If price holds settlement, price could test resistance at the declining 8-DMA. Resistance then comes in at the 21-DMa now at 257.125.
The Feeder Cattle Index increased and is at 251.20 as of 06/06/2024.
August Live Cattle continued to struggle despite continued strength in the cash market. You would think the cash market is collapsing the way futures are behaving. Cash was slightly below last week on average for up to Thursday trade but Friday saw packers give in and pay up to new highs for the week at 192.00 on a live basis. This should get the average up and depending on Trade into Monday morning lift the average above last week. Don’t forget we are still trading near all-time high prices for cattle and packers consistently have been failing to buy enough low-lying fruit. They get a few but producers have not had to give in. This, in my opinion is not 2018 or 2019 where numbers were so large, packers could sit back and wait for producers to panic and sell at the packers’ price. We are at low numbers for cattle inside and outside feedlots (which is why Feeder prices remain strong) so with corn prices low enough producers are willing to keep cattle in feedlots longer (days on feed over 120 days) to gain enough weight for packers to keep production at levels consumers can afford to buy beef. I have been told that packers buying cattle at 192.00 at 1450 # telling the producer the cattle are too light feed them longer and we’ll take them in two weeks. It is the packer desire for big cattle that is keeping the cattle in the feedlots and like said before with the cheap feed costs, producers have complied. The buying with time in my opinion by p[ackers is their need for more pounds and fear that prices will really get out of hand if the cattle are slaughtered quicker. Cutouts may not be moving towards 400.00 but they are comfortably above 300.00 and where retailers can move plenty of product, in my opinion. Features are being made at groceries and the recent employment shows plenty of money out there to buy beef. The bird flu fears in my opinion are overblown. Stories are going around that mass culling’s are occurring and then when they talk numbers it is around 12 – 20 cows culled. From conversation I have had culling’s haven’t surged in the dairy industry. There have been cattle killed, so that leaves less to be culled, in my opinion. Any worries about beef being contaminated and get into the food supply is also in my opinion overblown as inspections and testing are occurring in earnest to make sure this doesn’t happen. It seems like someone wants a scare to happen. I just don’t buy it. The industry is being very diligent and even that medical organization that I won’t name says we don’t have anything to fear. So, stop the nonsense! Packers wouldn’t be aggressive in my opinion if there was something to worry about. They are in the same game after all and would suffer just as much as producers if there was something to worry about. There is also stuff out there about vaccines from similar viruses that could be used to if needed. So, stop the nonsense! Cattle opened higher and then traded down to the session low at 176.55. The breakdown took price below the 50-DMA at 177.025 where buying came in and took price to the session high at 178.25. The rally took price just above resistance at 178.10 and then price once again changed direction and traded lower the rest of the session to settle at 177.175. If price can hold settlement, it could re-test resistance at 178.10. Resistance then comes in at the declining 8-DMA now at 178.60. If price can’t hold above the 50-DMA, it could test support at 175.95. Support then comes in at 174.425.
Boxed beef cutouts were higher as choice cutouts increased 0.54 to 316.75 and select increased 0.31 to 301.14. The choice/ select spread widened and is at 15.61 and the load count was 119.
Friday’s estimated slaughter is 118,000, which is below last week’s 122,000 and above last year’s 115,594. Saturday slaughter is expected to be 7,000, which is below last week’s 43,000 and above last year’s 6,571. The estimated slaughter for the week (so far) is 614,000, which is above last week’s 540,000 and below last year’s 616,547.
The USDA report LM_Ct131 states: Thus far for Friday in the Texas Panhandle negotiated cash trade has been mostly inactive on light demand. The most recent live FOB purchases were Thursday at 185.00, on a light test. In Kansas negotiated cash trading has been slow on light demand. The most recent live FOB purchases were Thursday at 185.00. In Nebraska negotiated cash trade trading has been slow on light to moderate demand. However not enough trade for a market test. Last week live FOB purchases traded at 190.00, while dressed delivered purchases traded at 301.00. In the Western Cornbelt negotiated cash trade trading has been slow on light to moderate demand. Compared to Thursday live FOB purchases traded steady to 2.00 higher at 190.00. Last week dressed delivered purchases traded from 300.00-301.00, on a light test.
The USDA is indicating cash trades for live cattle from 183.00 – 192.00 and from 297.00 – 302.00 on a dressed basis (so far).
For those interested I hold a weekly livestock webinar on Tuesdays and my next webinar will be Tuesday, June 11, 2024, 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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