Ground Beef!
Not even livestock futures were immune from the liquidation frenzy in the commodity markets yesterday, as lead month October Live Cattle futures fell by over 200 points despite solid demand for beef and firm cash cattle prices. Beef exports are up 20% through June versus last year, with June’s total of 41,000 tons being the highest so far this year. However, fund liquidation took center stage yesterday, with prices gapping below two major moving averages and taking out the recent lows at 94.25 to trigger sell-stops along the way. Today, however, traders will be keener on positioning themselves for this afternoon’s release of the monthly USDA cattle-on-feed report. According to a Dow Jones Newswire survey, analysts are expecting an on-feed number for August of 96.1%, Cattle placed in July at 86.9%, and Cattle marketed in July at 102.6%.
Looking at the daily chart for October Live Cattle, we notice the technical damage caused by yesterday’s speculative liquidation. Prices gapped below both the 50- and 100-day moving averages, setting a weak tone to the market. Once the August 13th lows at 94.25 were taken out, sell-stops were triggered, with few buyers looking to stand in the way of the onslaught. The sell-off has moved the 14-day RSI into oversold territory, currently reading 28.99. The June lows at 92.27 look to be the next major support point, with resistance seen at the 50-day moving average at 95.67. October Live Cattle closed at 93.70, down 2.22.
Mike Zarembski, Senior Commodity Analyst
