Cattle Futures Prices Could Move Back Up Over the $190 Mark
Well, the attitude of fund traders continues to swing wildly in approximately three to four-month cycles. In August the Chicago Mercantile Exchange was just starting to crash, supposedly because the stock market had a big correction.
The stock market recovered all of its lost territory in less than ten days. As of mid October, the CME live cattle futures is almost back to where it was on July 31. So, the cattle futures goes down with the stock market but not up with it. Some of these rules are hard to keep track of. The good news is that traders are back in a bullish mood as far as cattle futures are concerned.
The 5-area weighted average bottomed out at $181.18 in early September and has rebounded to $186.89 one month later. The USDA Choice carcass cutout dropped slightly below $300.00/cwt in mid-September and has now bounced back to about $306.00/cwt. Both of these are typical for this time of year and the market usually pushes higher into fall and winter.
But markets hate uncertainty and election years can provide that in abundance. The Longshoreman port strike was very short-lived, which is good news. And it didn’t seem to have the same effect on the cattle futures like recent events that were less related to beef supply did. Again, sometimes the rules are hard to understand.
Fundamentally, supply-side numbers are still in our favor, although, we have added a lot of additional pounds by making carcasses heavier. The claim is that we should be down about 3 percent of beef production from last year, but are only down 1 percent because of increases in carcass weights.
I’m a little skeptical, I think most of that extra weight is going to go in the barrel as fat, not in a box as beef. So, about that demand side. The cut-out is making strong moves and the rebound in cash prices started about the same time as the Fed interest rate cut.
In the traders’ mind, it’s all about the economy and whether demand can hold up at these prices. So far it is holding up well, if it continues we could see futures prices back up over the $190.00 mark.
