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Kevin Penner: Cattle price strength seen weakening
Cash 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 week.
Kevin H. Penner
Commodity Services, Inc.
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