Will Consumers Balk at Buoyant Beef Prices?
Today’s Spotlight Market
Feeder Cattle futures prices are near record levels as signs of a record Corn crop and resulting lower Corn prices in the U.S. is encouraging Feed lot owners to pay higher prices for young cattle as feeding margins have soared. To give an example, last week feed lot margins rose above $280 per head vs. about $165 last month.? However, last year feedlot margins were sharply in the red so it seems to behoove feedlots to try to maximize profits during this bull market.? ?
Fundamentals
There appears no stopping the bull market in Live Cattle futures as the lead month August contract made a new record high following the Independence Day Holiday. Processors paid record high prices for market ready Cattle last week as consumers have yet to shy away from beef purchases, despite lofty prices. This gave packers the incentive to pay up to a record $159 per hundredweight to secure what cattle was available for sale. Record high wholesale pork prices are helping to keep consumers from switching their protein sources as alternatives are also becoming pricey. While the up move in Cattle prices is impressive, we should note that market ready Cattle weights have begun to increase the past few weeks which should help to increase beef production totals, while lower Corn and feed prices should encourage feedlots to increase the time young Cattle is kept on feed,? especially given the current profit margins. All this including a speculative long position that is near record levels, could be the catalysts to finally wrangle this historic bull market.?? ?
Technical Notes? -? View Today’s Chart
Today we are taking an historic look at the Live Cattle futures market going back nearly 50 years for a perspective on the current price move. Prices have increased over 6 fold since the mid-sixties when prices were below $25 per hundredweight.? Prices were relatively subdued from the late 1970?s until 2003 when prices nearly broke the 100.000 price level. Since that time, was have seen increased price volatility that ultimately resulted in the nearly 5-year bull market run following the major low near 75.000 back in the summer of 2009 during the height of the global financial crisis.
Front-month August Live Cattle is looking overbought on the weekly charts as the 14-week RSI is at an extreme level of 85.74. The most recent Commitment of Traders report shows non-commercial traders beginning to lighten-up on their net-long position, shedding 2,427 contracts for the reporting period ending July 1st, which was just prior to the recent move to new highs.? Monday?s high of 156.475 looks to be resistance for the August contract, with support seen at 149.750.????
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