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December cattle has already pulled back 272 points from the October 23rd reversal peak and may have already corrected much of the overbought condition. Some traders believe that cash cattle peaked at $88.00 last week as movement picked-up ahead of the Rocky mountain snow storm and that demand for live inventory will decline this week. However, cash cattle may not pull back as much as believed and December is already a good discount to last week’s cash trade. News that movement in Taiwan to bring down restrictions for US beef brought about consumer resistance and threats to protest some items helped to add to the negative tone. Ideas that the economy will recovery without better spending on beef, a seasonal tendency for beef prices to pull-back while retailers shift to featuring hams and Turkeys and ideas that restaurant demand will remain slow has helped to pressure the market. December cattle closed moderately lower on the session on Friday and near the lows of the week as a bearish tone towards the beef market, expected seasonal pressures ahead and a limit-down move in the expiring October contract at only 81.65 helped to pressure. Ideas that the deliveries late last week did not go into strong hands and talk that producers might be more aggressive about selling cattle this week brought about fears that the cash cattle trend will be down for November. The Commitment-of-Traders reports on Friday showed a strong buying trend from speculators for the week ending October 27th. Trend-following fund traders shifted from a net short to a net long position buying a net 8,993 contracts for the week. In addition, Index funds increased their net long position by 4,659 contracts to 115,874 contracts. The speculative buying trend is a positive short-term force. The estimated cattle slaughter came in at 120,000 head on Friday which was near the low end of estimates. This brings the total for the week so far to 620,000 head, unchanged from last week at this time but up from 617,000 a year ago. While slaughter was up 1.7% from last year, beef production for the week was up 4% from last year due to heavier weights. Boxed beef cutout values were down 24 cents at mid-session Friday and closed 33 cents lower at $140.83. This was up from $139.02 a week ago. There were 14 re-tenders for delivery against the expired October futures.
TODAY’S GUIDANCE: The short-term direction of the market looks down but position traders may want to consider buying February cattle into the 86.15-85.70 support zone with 89.70 and 90.72 as longer-term objectives. Dec cattle resistance is at 86.20 with 85.15 as support.
