Morning Cattle

2017-04-20 09_18_05-042017_SF_Morning_Cattle    Sheet [Read-Only] - Microsoft Word

Livestock: The FCE auction was a mixed trade…not in price but by location. There were no lots offered in CO, IA, or TX, but we did see trade in OK, KS, and MN. Where the market did trade it was clearly higher than last week and the weighted average price ended up being 128.62. This auction trade was quickly followed by the direct trade turning very active with prices generally 3.00-4.00 higher in the live (up to a high at 133 cents) and the dressed trade was more like 4.00-5.00 cents higher. The clean-up in the south was very good. The north probably will see some more trade today or tomorrow.

Beef: Coming into the week many were looking for a stronger trade early and then to see the beef slip a little late and so far we have a Mon/Tue stronger trade and slightly weaker Wednesday trade with today also expected to be weaker. At this point we do not feel the Friday week-to-date completed trade will be lower than last Friday’s cut-out values, though. The slaughter through the first three days this week is running 4 thousand head under last week’s pace and there could be one more plant taking a dark day the rest of this week to keep the kill away from the 600 thousand head level, but the slaughter should get there and higher soon enough as the availability of cattle is on the rise as we move into May.

Futures: Wednesday’s futures trade was a firmer session with good strength in the front month April and modestly better the rest of the curve. The surprise in the trade yesterday was two-fold…the market fell behind the cash trade which was better than expected, and the open interest declined on new contract high trading. Thursday’s gap-higher opening is making amends for the relatively sloppy trade yesterday that certainly appeared to under-perform and give off the ‘topping out’ signal that is getting expensive quickly to any seller this morning. There will be a Cattle on Feed report on tomorrow. Most early guesses are coming in with On Feed at 99.8%, Placements at 106.9%, and Marketings at 109.3%. We still feel the estimated Placement number is too high. There were no deliveries against the April contract on Monday with the oldest long partially through 11/18/16. Be advised this Friday is option expiration for May corn and then a week later is FND for the corn.

                Basis: Last week's direct feedyard cash trade was between 123 and 131 cents with the 128 cent level being what we feel is a good average for what should be considered the cheapest to deliver animal. With the April futures closing at 125.37 cents last Thursday to end last week’s holiday-shortened week of trading, the basis for starters this week is fairly comfortable at a positive 2.62 cents. Yesterday we got the cash trade for this week established and all but completed with a practical range from 130 to 133 cents and we will use the 132 cent level as an average price for basis considerations if there are any or many April cattle left with hedges on. Most likely this is a May projection being brought forward with June live cattle hedges, but with respect to valuing the April contract, we expect to see a +2.00 cents basis coming in to +1.00 cents for early next week and then anything goes into expiration. 

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