Today’s Spotlight Market
Beef supplies are expected to see a rare increase in the 4th quarter this year, as production is expected to increase. This may counter the seasonal tendencies for cash Cattle prices to rise going into the winter.? Ironically, it is the small speculators who are holding a net-short position in Live Cattle futures according to the most recent Commitment of Traders report. In fact, the non-reportable traders position is the only one that is entirely net-short the whole livestock complex. ?
Fundamentals
Ample supplies of both pork and poultry are starting to affect beef prices as consumers vote with their wallets and switch to cheaper sources of protein. Beef prices have remained stubbornly high for most of 2015, which was a byproduct of reduced Cattle herds the past couple of years.? Drought conditions in the Great Plains had forced up the price of feed and, as a result, led producers to reduce the number of head of Cattle on feedlots.Now that feed prices have been greatly reduced, we are starting to see Cattle supplies increase, and average weights are at or near record levels.
Beef supplies are starting to increase at the same time that pork and poultry prices are tumbling, adding to fears that beef prices will also have to follow suit. We are also entering the timeframe when retailers will start featuring turkey for the upcoming Thanksgiving holiday, which may also factor into lower beef demand from retailers.
Futures traders have taken note of potential beef demand weakness sending Live Cattle futures prices tumbling off recent highs, with limit-down price moves seen on Wednesday for contract months out through June 2016 and expanded price moves seen for the first 3 expiration months on Thursday.
Technical Notes? – View Today’s Chart
Looking at the daily chart for December Live Cattle, we notice the price recovery that occurred for most of October now appears to have been only a correction in what may turn into a longer-term bear market trend for Cattle futures. Thursday?s continuation of the sell-off following Wednesday?s limit down price move has just missed filling the chart ?gap? that occurred back on October 7th. Prices are once again trading below the 20- and 200-day moving averages, but the 14-day RSI, while weak, has yet to reach oversold levels, with a current reading of 36.10. 133.225 is seen as the next support level for the December contract, with resistance found at 140.000.
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