According to Cassie Fish in her daily analysis, the Beef Read– just as we watched history in cattle prices soaring back in the late summer- the current plunge in cattle futures is historic as well: “CME cattle futures are in the midst of a serious and historic melt down. Since topping October 16, most active December LC and dropped 11.2% and November FC is down 14.9%. Last week and last month’s lows are history after today’s action and both feeders and fats are limit down.”
Because several of the live cattle or feeder cattle futures settled limit down on Wednesday, the market will have expanded limits tomorrow. For the Live Cattle futures- those limits will be $10.75 per hundred and for the Feeder Cattle Futures- the expanded limits will be $13.75.
Fish adds “There is no logical or quantifiable reason for the market top since everyone in the cattle industry is fully aware the tightest fed cattle supplies lay ahead for many months. But market confidence has been shredded and once that occurs, it’s difficult if not impossible to repair—at least in the short-run.
“Today, fear, disbelief and anger are just a few of the emotions in ample supply. But futures markets are immune and in this day and age, are ruthlessly quick to get where they are going. Right now the market appears to be on a mission to find a tradeable low. Just how low the market will go is up for debate by traders and chart technicians—though no one really knows until the market has actually gotten there.
“One area to consider that is ripe for retracement is the entire Q3 move. It’s hard to believe that after a nearly $28/cwt break in fats and $57/cwt break in feeders, that the beginning of the Q3 rally lies still lower.”
OKC West Manager Bill Barnhart has a market that traded hope on Tuesday and terror on Wednesday. Steer and heifer calves 20.00-30.00 higher on Tuesday reacting to the better feeder cattle futures seen on Monday. But Tuesday saw the futures dive off the cliff and Wednesday the crash got worse- with Live Cattle Futures down the limit of $7.25 and the Feeder Cattle Futures going limit down- off $9.25. USDA Market News offered a description of the yearling sale- “Wednesday’s feeder market was crazy to say the least.” Barnhart says the yearling trade at his market was painful to see: “Needless to say shell shocked feeder buyers bought cattle 10.00-20.00 cheaper today on top of last week’s losses. Just as the market got too high it will over correct at some point in it’s search for solid ground. Calves Tuesday regained some of the ground it lost last week as demand for wheat pasture cattle overtook the uncertainty in rest of the market.”
DTN Market analyst ShayLe Stewart believes it’s fear over fact for the fall from the heights since Mid October- “The reason is that the market continues to be anxious over the border issue. Even though Agriculture Secretary Brooke Rollins has shared that the border isn’t going to reopen any time soon, the market isn’t convinced, as so much confidence has been eroded from the complex over the last two weeks.”
How much lower is a bottom? Barnhart’s comment that the market will likely over correct is likely right- it’s just nobody knows how low that might be.
