Sort and Cull

Gauging the Week Ahead for the Cattle Complex

ShayLe Stewart
By  ShayLe Stewart , DTN Livestock Analyst
The week could be burdened with some technical pressure as later this week the monthly Cattle on Feed report will be released. (DTN ProphetX chart)

At least there's one thing we can say about the cattle market -- no two weeks are ever exactly the same! As I began to evaluate the cattle complex early Monday morning, I thought I'd share some of the bearish and bullish factors I'm monitoring this week as I know that many of you are trying to wrap your mind around the market, too.

LIVE CATTLE

The live cattle complex struggled to gain its footing throughout Monday's trade, despite the fact cash cattle prices held steady in both regions last week and packers weren't able to get many cattle bought into the deferred delivery option. Last week, Southern live cattle traded at mostly $181 and Northern dressed cattle traded at mostly $288 -- both fully steady with the previous week's weighted average. Last week's negotiated cash cattle trade totaled 61,496 head. Of that, 83% (51,181 head) were committed to the nearby delivery, while the remaining 17% (10,315 head) were committed to the deferred delivery.

From a fundamental standpoint, there's a good chance that cash prices are able to trade steady again this week, especially if packers continue to run slightly more aggressive chain speeds.

But from a technical standpoint, when you look at the spot December contract, you quickly realize that there are some obstacles ahead for traders. First, traders will be reluctant to take on the resistance at the market's 40-day moving average and traders typically trade cautiously ahead of Cattle on Feed reports -- and this upcoming Friday, the USDA will release another one.

Secondly, if you look at the December contract, you'll see that during the last month, the market has begun to trade in a narrow trading range and currently the market is at the upper level of that range. That could pressure traders.

FEEDER CATTLE

Even though the live cattle complex struggled to trade higher throughout Monday's trade, the feeder cattle complex was met with more enthusiasm from traders, especially in the deferred contracts.

From a fundamental standpoint, cattlemen are noting that sale barns are seeing bigger receipts, which indicates that the fall run is already underway.

But weather fluctuations and the unsettled tone throughout the live cattle/cash cattle market draws some hesitancy to the feeder cattle market's ability to trade higher.

ShayLe Stewart can be reached at shayle.stewart@dtn.com

ShayLe Stewart