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Kevin Penner: Cattle prices seen remaining higher

08/24/2010 @ 2:35pm kevin@agtradertalk.com

Cash Cattle showed surprising strength last week, gaining $5/cwt by Friday to $100, and two major factors that were credited for that rally seem to still be in place this week. USDA wholesale beef prices and futures rallies to contract highs at The Merc were major factors in last week's strength. This week we are already seeing strength in the boxed beef and at the CME Group. If strength is maintained again this week we could see cash cattle trade over $100 by Friday.

Boxed beef values continue to maintain momentum during this current rally. Last week saw upward price movement and Monday of this week we saw the Choice up $1.16 to $162.93 and the Select up $1.45 to $156.08. As export levels remain strong and as chatter about strength at the domestic retail level is verified we could see increases in projections for demand. As cattlemen continue to keep supplies at recently reported levels we could see marketings continue to remain current for several months. This balance should lend solid support to cash values.

The futures board at the CME Group in Chicago is also supporting this cash market. Last week we saw over $3.00 added to the October contract, a new contract high, and this week we started with a 60 cent move higher for Oct Cattle and an unchanged opening in Tuesday's Globex trade. As long as the uptrend in fat cattle futures remains intact commodity funds will have little reason to cut their profits. Technical strength is present on the charts of these contracts and Short players in this market are being forced to liquidate. All of these factors are helping to push futures higher. As the futures board remains strong this should also lend solid support to cash values.

This week the Call for cash cattle is Steady/Higher. Today cattle were offered at $102 and no bids were seen. Packers may be out early this week trying to buy at steady levels. Those that wait until Friday could be paying over $100.

Kevin H. Penner
Commodity Services, Inc.
Des Moines, Iowa
(800) 274-2074
kevin@commodityservices.com

Since futures and options may not be a suitable investment for everyone, and the risk of loss may be substantial, all investors should carefully consider their financial condition in deciding whether to trade. The information contained herein is believed reliable, but is in no way guaranteed.

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