April Live Cattle eked out another new high today, reaching 130.10. It was a quiet session with a very small trading range. It settled at 129.925 for the second a day in a row. The 129.925 level is a key resistance level and price is knocking at the door, trying to break it down. A successful takedown of this resistance level could see price test resistance at 131.50 and then 132.925. The May 4th high of 134.55 waits. Continued weather problems in the north have put pressure on production as weight loss is a major issue. There is also the high cost of just trying to maintain the weight on cattle as frigid temperatures and snow rip across the north. Producers want to get rid of these cattle in a bad way but are looking to receive higher prices for them. Producers are looking for a big pay day as they think packers need to buy cattle. They are asking for 128.00 to 130.00. Can they hold out? Packers don’t want to buy cattle at higher levels and will probably continue to cut back on the numbers if they have to pay up for cattle. They would probably buy a large amount (over 100,000) of cattle below last week’s price at 126.00. The less cattle bought by packers could be problematic for producers as feeding these unsold cattle for another week will be expensive. Frigid temperatures are expected to last for at least all of next week, putting more stress on already stressed cattle. A breakdown from the session low at 129.65 could see support tested at 128.10.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursday, February 28th 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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Senior Market Strategist
Walsh Trading, Inc.
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.