Beef Rally Grounded as Speculators Liquidate Long Positions
Today’s Spotlight Market
Seasonal trends point to lower Live Cattle prices, as the dog days of summer tend to see lower red meat sales. However, the recent sell-off in prices has deferred futures prices trading at a significant discount to cash prices, when seasonal trends call for spring futures to trade at a premium. Even the front month October futures are trading at a discount to Cash, which could lend some support once the long liquidation selling subsides.?
The historic bull market in Live Cattle futures has run into some headwinds, as traders fear increased domestic pork and poultry supplies may hurt beef demand. After trading above 160.00 to start the month of August, October Live Cattle futures prices have fallen over 12 cents per pound on what appears to be long liquidation selling. The downward momentum in prices accelerated once the market fell below the 20-day moving average. Traders are showing concerns that trade sanctions against Russia, for its involvement in Ukraine, will sharply curtail U.S. exports to this important meat purchaser. Although the size of U.S. beef sales to Russia are relatively minor, U.S. poultry producers rely on Russia for a significant amount of sales. Any excess production will fall to the U.S. market and help to keep prices competitive compared to both pork and beef which are near record levels. While current beef production totals continue to lag behind the 5-year average, the potential for a record Corn and Soybean crop this season have sent feed grain prices sharply lower which should provide significant encouragement for livestock producers to expand production in the coming months.?
Technical Notes? -? View Today’s Chart
Looking at the daily chart for October Live Cattle futures, we notice prices attempted to rebound from a limit down close on Friday as buyers emerged once prices reached the chart support zone between 146.50 and 148.00. However, the bullish hopes were dashed as prices, once again, briefly tumbled the 3.000 limit on Tuesday.? Despite the recent price declines, the 14-day RSI is holding just above oversold levels, with a current reading of 32.15. The June 18th low of 146.50 is seen as the next support level for October Live Cattle, with resistance found at 157.250.
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