Bears Well ?Fed? As Cattle Prices Fall
Today’s Spotlight Market
Fed officials voted 9 to 1 to keep interest rates unchanged at 0.0% to 0.25%, as forecasts call for slower economic growth rates in 2016 and 2017. Richmond Federal Reserve Bank President Jeffrey Lacker was the lone dissent in the rate decision, with a preference for a 25-basis-point rate hike. Markets were volatile following the announcement, with the E-mini S&P 500 futures trading in a 25-point price range in 5 minutes time.? U.S. Treasury Bonds rallied, with the 30-year bond rallying over 1 full point as of this writing.
Fundamentals
Taking a break from ?Fed Talk?, I thought we would explore the Live Cattle futures market, which has been in a bearish trend since June. The lead month futures are trading at their lowest levels in over a year, as traders fear that relatively expensive beef prices, especially compared to pork and poultry, will hurt retail demand. With the ?official? end of the summer grilling season upon us, retailers have traditionally featured tougher beef cuts more appropriately used for fall dishes such as stews, which are generally less expensive than more ?prime? cuts such as steaks that are utilized for grilling.? However, even cheaper cuts of beef are still relatively expensive by historical standards, which may discourage ?sales? by grocers and keep wholesale demand subdued.
Cash market traders report meat packer demand starting to increase, but only if they can secure market-ready Cattle at lower prices. Cash prices are down nearly 5 cents per pound from last week?s sales, which are still running below levels seen this time last year. Livestock traders will end the week focusing on the news wires, as the monthly USDA Cattle on Feed report will be released this afternoon at 2 pm central time.? Pre-report estimates are for Cattle on Feed as of September 1st to be 103.7% of last year?s totals. Placements in August are expected to be 100.5% vs. last year, with marketing in August at only 93.7% of last year?s totals. Traders looking for how the financial markets reacted to the Fed announcement can get a summary in the ?Today?s Spotlight Market ?section of this newsletter. With all the market uncertainty surrounding the Fed announcement this week, I am sure the only ?Fed Talk? many traders will want to discuss are the merits of ?Grass Fed? or ?Corn Fed? during this last weekend of summer.??? ?
Technical Notes View Today’s Chart
Looking at the daily chart for October Live Cattle futures, we notice prices remain weak following Wednesday?s limit down move. The market is now well below both the 20- and 200-day moving averages, and we may see additional selling pressure as trend-following systems may add to existing short positions given that prices broke below key support near 140.000. The 14-day RSI is weak, but is holding just above oversold levels, with a current reading of 32.62. 135.400 is seen as the next support level for the October futures, with resistance found at 144.600.
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