Archive for the ‘Live Cattle Futures Trading’ Category

Feedlot Data Halts Cattle Futures Decline

Cattle futures have put on the brakes on a market near its 15-month lows as data is emerging showing the number of animals going to feedlots has spiraled to an all-time low. Cattle futures traded down $1.50 per CWT to settle near $138.25 at the Chicago Mercantile Exchange.

Cattle used for meat raising usually get placed at feedlots to fatten-up before going to market, but the number of animals scheduled for feedlot placement fell almost 5.5% from the same time last year – the fewest since the USDA started record keeping in 1996. The feedlot population is reportedly just shy of 10M-head of cattle, which is actually more than 90K-head short of analysts expectations but still considered rather bullish for this market.

The trend for cattle futures is down with no bottom yet in sight. Cattle futures will have to demonstrate a halt of lower prices before a change in trend occurs, but let’s enjoy the low prices while we can.

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Pork to Surpass Beef Production a First in 60 Years for Livestock Futures

High beef prices and rising demand for pork products as a cheaper alternative are setting the stage for beef to take a back-seat in production (for pork) for the first time since 1952. Both livestock animals have been hit hard lately with drought, high feed costs, and disease these last few years, but hog herds have rebounded sooner and circumstances have led to the breeding of more pigs and bigger animals.

The USDA estimates domestic pork output to increase 4.6% this year (to an all-time high) while at the same time cattle ranchers are still recovering from the 2012 drought that has brought cattle production into what will be a 22-year low. Just over a month ago, for the the fourth-quarter 2014, the USDA reported the breeding-sow herd posted the biggest increase since 1998 with the total hog population jumping 2% from a year earlier.

The trend for both cattle futures and hog futures are down with no clear bottom yet in sight. However, if last week’s lows hold in both feeder cattle and lean hog futures, then we can at least see some type of relief rally before another test of yesterday/today’s low.

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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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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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Slowing Sales Stumps Cattle Futures

There is an emerging outlook that demand for domestic beef is prematurely slowing down.  Cattle futures have reportedly fallen a second straight day on this speculation.

USDA data reflects meat-packers processing just over 370,000 cattle the first three days of this week, which is one-half a percentage lower than this same time last year.  Maybe retailers have fulfilled their beef orders for the upcoming holiday weekend?    

Barb Levy, chief director for Futures & Options Xecution’s futures division in Chicago, had this to say regarding the current cattle futures situation, “Cash market for cattle has been sluggish in the past few sessions. The recent record high (beef prices) has traders worried that domestic demand will start shifting away from beef and towards cheaper poultry or pork products.”

The trend for cattle futures are both down.  Live cattle futures just rolled over to resume its downtrend this past week, while feeders are still clearly down with no bottom in sight.

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Cattle Futures Find Support on Limited Supply

There is now the outlook of tightening domestic supplies of beef (and perceived forthcoming higher beef prices) thanks to the reporting of the USDA yesterday.  Cattle futures retreated today from their recent slide.

Specifically, the USDA stated yesterday they expect domestic beef production a little less than 1% from last month’s estimate, and 4% total less than last years.  The entire domestic cattle-herd, coming into this year, has been the smallest since the early 1950’s.          

The sheer amount of cattle available for slaughter remains very tight as we move into the 2nd quarter of 2013,” said Kevin Riordan, director of research at Capital Trading Group in Chicago, regarding the current cattle futures situation.

The trend for cattle futures remains down, but feeders appear to be turning the corner.  As long as cattle futures remain a mixed-bag, I will await committing to direction until a clearer picture unfolds.

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