Can Cattle Futures “Beef” Up Prices Heading Into Winter?
Winter month Live Cattle futures continue to hover around the $100 cwt level, as a surprising drop in Cattle placements on feed in July has traders looking for tight supplies going into the winter. However, beef export business has been slow, especially with South Korea banning imports from three U.S. meat packers due to the discovery of bones in recent shipments. Japan has allowed the importation of U.S. beef, but only from cattle 20 months old or younger due to fears of mad cow disease. Futures are trading at a solid premium over cash market prices, with light trading in the $95 cwt found on Friday. Recent concerns of a slowing U.S. economy would also be a bearish factor for Cattle futures, as consumers switch over to cheaper meats such as pork or poultry. The most recent Commitment of Traders report has speculators on both sides of the fence, with large non-commercial traders net-long 38,090 Live Cattle contracts as of September 7th, and small speculators net-short 30,579 contracts. With valid arguments for both sides on the direction of Live Cattle futures, some traders could “moove” to the sidelines until bulls or bears win the battle.
Looking at the daily chart for December Live Cattle, we notice Friday’s sharp price drop sent the contract below the lows of the recent trading range of 99.62. Prices managed to close just above the 20-day moving average at 99.40, which could be supportive to Cattle prices should this level hold on a closing basis. Momentum as measured by the 14-day RSI has started to weaken, but remains in neutral territory with a current reading of 44.04. Major support is seen at the 50-day moving average of 98.75, with resistance found at 100.20. December Live Cattle closed on Friday at 99.45, down 0.77.
Mike Zarembski, Senior Commodity Analyst
