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Cattle Rally: Be Ready to Capture It
Cattle futures have come to life yet again. Demand, and demand alone, is the sole reason for higher prices. Domestic and export demands are solid as packers gear up for holiday needs. At the end of October, beef prices increased substantially suggesting boxed beef prices on Friday, October 27, closing at $203.30. This is the highest beef market since early August.
Who’s eating the beef? Americans, of course. In 2017, per capita American red meat and poultry consumption is on pace to reach 218 pounds, with the average American eating about 54 pounds of beef per year, according to Rabobank. Also, global demand for beef continues to rise around the world as feed grain has been cheap and global economies are strong. The largest demand increases are from China where, according to the USDA, domestic consumption of beef grew 20% to 7.8 million tons from 2011 to 2016. That trend is expected to continue growing.
Enjoy the price rally in cattle, and be mindful to lock in profits as they occur in the coming days and weeks. Remember, cattle supply in the U.S. is plentiful with the USDA reminding us of that fact in the most recent Cattle on Feed Report. The On Feed supply is 105.4% of last year, and cattle placements are 13% higher than last year. This is the highest level since 2011. Again, this is a demand-led rally. If there is any sign at all that demand is tightening, cash and futures prices for cattle will ease lower.
So, what should you do at home? Be ready to lock in cash sales or consider a futures or options strategy to lock in pricing opportunity. The technical target to the upside on February 2018 live cattle futures is $132.00. The technical target for April 2018 live cattle futures is $130.00. Should futures prices hit those levels, the market will be likely to see profit taking, thus, lower prices.
My fear is once holiday demand is met in the coming weeks, and holiday credit card bills come due in January, Americans might be a bit more mindful of their spending heading into 2018. That means eating out less, and not buying expensive cuts of meat as often. This is a demand-led market, and there is much political drama that could also happen globally as 2017 comes to a close. You have profits. Lock them in.
If you have questions, you can reach Naomi at firstname.lastname@example.org .
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