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Kevin Penner: Cattle trade seen dipping

Updated: 08/03/2010 @ 8:45am kevin@agtradertalk.com

Seasonal pressures could combine with other sliding market influences to, again, allow a lower cash cattle trade this week.  Last week, we saw a larger than expected dip to $92 cwt and this week we expect steady prices at best and possibly $90-91. Contributing factors to the direction of trade this week will be the Futures Board and the Boxed Beef prices.
Last week we saw choppy trade at the CME Group that featured technical key-reversals in both directions and large losses on Monday followed by large gains on Friday. Such choppy action can indicate a Top on a commodity chart and failure this week to Close above last Monday's High in Oct Cattle of $95.15 could support ideas of a Top being seen in this market for now.  Action on the first trading day of August was strong at the Open, however, buying momentum dried up and despite a 200+ point higher day on Wall St and gains in most grain we closed lower for the day. This is not a good way to set the stage for higher cash prices this week.
Boxed Beef prices have seen recent pressure as well. As packers are unable to sell their finished product for more money they are not inclined to pay higher prices for their inputs.  Slipping beef prices may have led to lower cash cattle prices paid last week and with a report of both the Select and the Choice beef down over $1.00 today we, again, are not setting the stage for higher cash prices this week.
We have had no reported bids as of close of business on Monday and cattle are being offered at $94 or better. Trade started last week in NE on Wednesday; we look for similar action again this week.
Kevin H. Penner
Commodity Services, Inc.
kevin@commodityservices.com <mailto:kevin@commodityservices.com>

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