Content ID

269439

Bears Are The Loudest On The Cattle Market

Bulls don't believe bearish supply estimates will be reached.

Weekly cattle slaughter was estimated by USDA at 595,000 head. This was a little under our 602,000 morning estimate but not that much of a surprise.

Last Saturday’s run fell below trade expectations. This week’s run still on the lower end of recent non-holiday kill weeks. This week’s kill was only 1.1% over last year. Last week’s kill was only 0.4% over last year.

These two weeks are running under the February levels when they were 2.6% over last year. Bulls would like to suggest this means we won’t hit those very bearish supply estimates discussed for April and May. Bears would suggest the numbers are there but that packers have tried to reign in this market to capture margins. Allendale is in with the bearish camp on the supply discussion.

We see numbers up to 635,000 head by the end of April.

This week's mixed cash cattle performance failed to support futures. Cash traded from $126 to $128.50 this week. Last week's average was $127. June futures, the dominant contract, closed down 2.37.

Thursday's weight numbers, detailing production stats for the week ended 3/2, was minimally slightly bearish. The average dressed steer weight grew from 0.6% over last year to now 0.8% over. The average heifer carcass dropped from 0.7% over last year to 0.6% over.

We started the commentary by noting the big issue bears are pointing out. It is a valid concern. Let's balance that out by noting something bulls hope is recognized. The monthly Consumer-Sentiment index from the University of Michigan was released today. It was reported at 102.0 in March, up from 99.7 in February. The trade expectation was 99.0.That was the highest level since January 2004. This index reading is 5.3% over last year for the same period. The U of MI index is available only to subscribers. In its place we'll show the other consumer confidence index, this one from the Conference Board.

Bulls looking for bullish news can also point out weekly beef export sales were helpful on Thursday. They were 25% over last year. The year to date pace is 19% over last year.

We remain a bit concerned about feeder prices and cattle feeder profitability. Breakevens from KSU suggest $122 are current levels, $126 for April, $129 for May, and $127 for June. Chances of filling our $126 hedge order via the April is low. If that is filled, we will be selling the April, June, and August. RN
 
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Rich Nelson Allendale Inc. 815-578-6161
This material has been prepared by a sales or trading employee or agent of Allendale Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Allendale’s Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.
 
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The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Allendale Inc. believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

 

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