Archive for the ‘Cattle Futures’ Category

Cattle Futures at Record Highs, No Top Yet in Sight

Feeder cattle futures reached record highs yesterday at just over $2.10 per pound. Domestic ground beef prices are said to be up 76% in the past five years following a seven year decline in the US herd has left the fewest cattle since 1951 – USDA data shows.

There is speculation it may take at least three years to expand the herd to get supply in front of demand while the USDA claims the US will become a “net beef importer” in 2015. Expanding beef output will be no easy feat with the gestation period for calves being nine months and full grown animals taking as long as 22-months before reaching slaughter weight.

Short-term cash fundamentals look strong. The trend is still up. We watch this (cattle futures) market in awe,” said Christian Moreno, a commodities broker for HighGround Trading Group in Chicago, regarding the current cattle futures situation.

Cattle futures up-trend shows no sign of relenting. I am patiently awaiting some type of pullback in feeder cattle futures prices to feel more confident about taking a position.

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Higher Beef Costs Loom as Feeder Cattle Futures Extend Rally

Feeder cattle futures have soared to record highs and are poised for their biggest rally not seen since 1992. Beef prices are already at their highest ever, but with US ranchers sending fewer animals to slaughter, it can only mean higher costs for beef looming.

Recent USDA data shows the domestic feedlot-herd at this time last month actually shrank one-sixth of 1% from the same period as last year. Furthermore, for this past first-quarter, meat-packers processed 7% fewer heifers versus the same period as last year partially due in part by producers holding back more animals for herd-expansion purposes (which can take as long as three years).

Laura Taylor, a senior commodities broker at RJO Futures in Chicago, had this to say regarding the current feeder cattle futures situation, “The feeder cattle market has hit consecutive record highs this week, supported by a recent inventory report that indicated a smaller than expected number of calves and lighter-weight animals on-feed.”

The trend for feeder cattle futures is up with no top yet in sight. I made a big mistake exiting feeder cattle futures on Monday when I saw the market unable to retain it’s gains. I will need some type of pull-back before reinitiating another long position.

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Tight Supplies Extend High Cattle Futures Prices

Cattle futures continue two trade in a $3.00 trading range near 10-month highs on signs our domestic cattle supply is tightening.  Cattle futures are currently trading at $132.50 – $2.00 from their October $134.50 high, and $1.00 above last week’s (and last month’s) low.

USDA data shows meat-packers processing roughly 607K animals through last week.  When compared to animals processed just a week earlier, it’s a 2.3% decline – and from the same period last year it’s a full 4% reduction.
           
The cattle (futures) market may see choppy two-sided trading as beef prices remain weak along with demand. However, with expectations of a declining supply the foundation my already be built for strong price support,” says Kevin Craney, Director of Managed Futures at RJO Futures in Chicago, regarding the current cattle futures situation.  Craney adds,Traders will continue to monitor supply expectations as the primary driver.”

Cattle futures trend (in my work) is just now starting to roll over from an all out up-trend, to a downward bias.  I am standing by for feeder cattle futures to paint a more clearer picture of its intentions.

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Tighter Beef Supply Lifts Cattle Futures

An outlook of domestic beef output “dropping” as demand increases have sent cattle futures higher this week after their big drop one week ago today.  Cattle futures are currently hovering around “unchanged” from yesterday, however.

The USDA has forecasted beef production this year should fall 1.2% to its lowest levels since 2005, but USDA data also shows wholesale beef prices averaging $1.94 a pound this year – the highest on record since 2004.  A Texas A&M economist is predicting beef output to scale back a full 6% next year and another 2%-3% in 2015.
           
Kevin Riordan, director of research at Capital Trading Group in Chicago, had this to say regarding the current cattle futures situation,Increasing evidence that there could be some tightening of supplies in the cattle (futures) market has been increasing supportive to prices.”

The trend for cattle futures is technically “up,” however there is a “topping pattern” in place for both the fat & feeder cattle contracts.  We’ll maintain our long feeder cattle futures position until the picture changes otherwise. 

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Lower Feed Costs Boost Feeder Cattle Futures

Feeder cattle futures have spiked to record highs as the price of corn continues to trend lower.  With less feed costs, our ranchers can see bigger profits after raising the animals and taking them to market.

Corn is the main, and preferred, ingredient ranchers use in fattening up cattle coming from pasture and corn has plummeted more than 35% this year alone.  A livestock auction house in Texas reported cattle prices selling $3 to $5 dollars higher than the prior week.    

The price of corn ‘is the main factor’ driving the feeder market,” said Lane Broadbent, vice-president of KIS Futures, Inc. in Oklahoma City, regarding the current feeder cattle futures situation.  Broadbent added,The cash market is incredible.”

We are long feeder cattle futures from yesterday, and with this new high there is no top yet in sight.  I’m watching my stops close with this cattle futures market.

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Declining Beef Demand Pressure Cattle Futures

Cattle futures may be feeling the pressure of consumers opting for something other than beef.  Cattle futures have been at a standstill after a mid/late September run-up in price – making poultry or pork on the menu.

Gov’t data shows wholesale beef prices down 2.2% in the third-quarter, but pork dropping 7.2% and chicken breasts sliding 9% during the same period.  The cost of cattle for slaughter dropped a couple of cents per pound this week from last as I understand too.
           
Weak demand continues to pressure cattle (futures). However, demand has come back from the summer doldrums,” said Kevin Craney, Director of Managed Futures at RJO Futures in Chicago, regarding the current cattle futures situation.  Craney added,Traders will continue to watch the demand picture along with the tight supply for support in the (cattle futures) market.”

Cattle futures trend is up with no top yet in sight.  Cattle futures (and livestock in general) are some of the few markets that do not tend to forewarn us of changes in trend – in my 20 year observation.  Looking for low-risk opportunities on the long-side…

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Cattle Futures Pause on Signs of Slowing Demand

Cattle futures continue lower since the recent mid-month highs on signs of slowing beef demand.  Cattle futures are down .45c per pound as of this writing.

The USDA shows wholesale beef dropping their biggest amount since early this month to nearly $1.96 per pound just yesterday.  USDA also shows 5% less meat packaged than a week earlier, which is significant because grocers are reported to have finished their beef purchases for the upcoming Labor Day weekend.
           
The cattle business has slowed considerably as we head into the holiday weekend. Cattle (futures) prices are easier as the market is dealing with larger show-lists this week,” said Kevin Riordan, director of research at Capital Trading Group in Chicago, regarding the current cattle futures situation.

The trend for cattle futures remains up despite the temporary setback.  This cattle futures pull-back is a buying opportunity until the trend changes and heads south.

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Cattle Futures Spike on Feed Issues

It appears cattle fed with certain “supplements” are discovered to be “lame” at time of slaughter.  Cattle futures spiked to a five month high upon the outlook domestic beef supplies can contract a major food company has halted purchases of animals fed with supplements made by a prominent pharmaceutical company.  Yes, you read right.

Cattle suppliers were sent a letter by Tyson Foods claiming the reason for some animals “not being to ‘walk'” is possibly from a feed supplement called “Zilmax” (or, “zilpaterol”) made by Merck & Co.  Merck claims the supplement to be safe, and the evaluation of the animal problems continues with this “interim measure” commencing on September 6th.
           
Christian Moreno, a commodities broker for HighGround Trading Group in Chicago, had this to say regarding the current cattle futures situation, Tyson Foods not purchasing animals that use Zilmax is a game changer.  Europe and China don’t use Zilmax.   This will move prices higher.”  Moreno added, “Traders see a decline in cattle (futures) into the 4th quarter a bullish factor and if we see a production decline we might see prices go even higher.”

Since late June the trend for cattle futures has been up with some choppy action as of late.  After this spike, lets be patient for cattle futures to retrace and dip back down before buying.

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Cattle Futures Weighed Down on Waning Demand

For the second day cattle futures have backed-off their recent highs on the outlook of hot weather throughout the nation preventing people from grilling beef outside.  Both feeders and live cattle have backed off over one-half percent in late morning trading at the Chicago Mercantile Exchange.

Weather reports across much of the country and into Canada spelled out 90 degree heat coupled with humidity.  Plus, the USDA has reported wholesale beef prices falling for the eight straight session – not seen since March.
           
With no signs of relief with this heat, expect beef prices to remain depressed for another week,” said Christian Moreno, a commodities broker for HighGround Trading Group in Chicago, regarding the current cattle futures situation.

Cattle futures trend remains up while this dip in beef prices are forming.  Cattle futures may be depressed into next week according to the seasonality for this time of year, but still no “top” yet in sight for this market.

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Cattle Futures Impacted by Low Domestic Herd

The US domestic cattle herd is said to be at a 60-year low after the biggest cattle producing state (Texas) finds itself in the third year of drought.  Major food corporations such as Cargill & Tyson Foods are reportedly doing everything they can to maintain profit margins amid much slaughterhouse vacancy.

Just last month, the USDA stated the slaughter of commercial cows in the first half of the year may be the largest culling since 1996 in part due to nearly half of Texas pastures in poor, to very poor shape.  When you also take into account hot & dry weather and three years of rising feed costs, there is little incentive for cattle producers to maintain a larger herd size.
           
Christian Moreno, a commodities broker for HighGround Trading Group in Chicago, had this to say regarding the current cattle futures situation, After yesterdays wide range and strong close it looks like the cattle market is well positioned to test the June highs and continue its uptrend.”

The trend of rattle futures had been down for much of the year, but last month the trend has turned upward.  I will be looking to buy cattle futures on dips.

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