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Kevin Penner: Cattle price strength seen weakening
Cattle have had a good rally during the month of July. But, we may soon see the
strength of that move start to wane.
Last week, $95/cwt bought cattle in the southern Plains and the call for this
week is steady. As of Monday evening, we have already seen some limited
bids at $94 and cattle are generally offered at $96. Seasonally we begin to see
fed cattle prices start to slide in August and September. So, we may have another
week of $95 in July 2010. But, I would expect the prices to begin to slip as early
as next week.
Heat could play a major role in the push to sell cattle this week. Kansas saw
extreme heat and humidity last week and thousands of head were reported to have
died from extreme heat. If the weather forecasts again this week shows signs of
extreme heat, especially in KS, we could see some feedlots push to accept bids
early in the week.
The Futures Board will again also help establish the direction of the cash
market this week. Losses of 65-95 cents posted on Monday, at the CME Group, could
help to damper the July Cash Cattle rally and encourage packers to bid lighter
as the week continues. Recent data published in the Commitment of Traders
Report shows that Commodity Funds continue to hold large 'long' Live Cattle
positions. The thought of Funds liquidating their cattle positions will be kept
in the back of traders minds as the Cash Cattle market unfolds this week.
I expect to see $95 start to buy cattle, by as early as Wednesday this week. Keep
an eye on the Chicago Markets. Another sell-off on the 'board' on Tuesday would
only serve to increase the likelihood of even lower bids by the end of this
Kevin H. Penner
Commodity Services, Inc.
1901 NW 92nd Court, Suite B
Des Moines, Iowa 50325
(515) 251-3100 Office
(800) 274-2074 Toll Free
(515) 251-3133 Fax
(515) 770-1619 Mobile