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The technical action is impressive and the market seems to be in a position to see the cash market rally this week but beef prices are not moving higher in a period of tighter supply and this does not help to rationalize the premium of futures to the cash market. While the futures could bounce for a few days, a significant rally appears unlikely until pork values bottom or until demand and/or exports begin to improve. There were only 5 new deliveries this morning. October cattle closed sharply higher on the session yesterday with some stability in beef prices after the recent bounce and talk of tighter supply supporting the cash market this week helping to support. In addition, a rally in hogs and strength in outside market forces helped to support. Traders believe that cash cattle will trade $2.00 higher this week to $84.00 in the southern plains and this would narrow the premium of October to cash and helped support as well. Cash cattle were trading near $100 last year at this time. Boxed beef cutout values were up 6 cents at mid-session yesterday and closed 6 cents higher at $142.44. This was up from $141.62 a week ago but down from $164.34 one year ago. The estimated cattle slaughter came in at 128,000 head yesterday which was a little higher than expected and might be considered a supportive factor as well as packer demand for live inventory improves. This brings the total for the week so far to 250,000 head, down from 251,000 last week at this time but up from 249,000 a year ago. Traders are looking for placements in Friday’s Cattle-on-Feed report to show a 4-8% jump from last year which is seen as a negative. The market is hoping to see a recovery in consumer demand this fall but weakness in stocks this week could be seen as a negative force today.
TODAY’S GUIDANCE: The market bounced from an oversold condition and on ideas that the cash market can trade higher ahead. The market has the supply fundamentals to push higher but demand news remains weak and beef prices have moved sideways in a period of tighter supply. Close-in support comes in at 88.32 for October cattle with 89.30 and 89.82 as resistance.
TODAY’S MARKET IDEAS: The market may bounce but don’t expect follow-through to the upside until traders see better demand, better exports and a low in pork.
