Sort and Cull

Last week was truly a mixed bag for the cattle complex. Early in the week, traders eagerly supported the contracts; but by the week's end, their support waned as both the live and feeder cattle contracts drifted sharply lower through the week's close.

Looking at the week ahead, the first thing that comes to mind is trying to pinpoint where the market is headed next. Unfortunately, unless something unforeseen develops from the market's fundamentals, it's most likely the market will chop sideways or drift lower.

Just like early last week, both the live cattle and feeder cattle contracts shot higher as the market was quick to note the bullishness of the Cattle on Feed report and was encouraged to hear that USDA will soon share its plans on how it's going to help "revitalize the American beef industry." But as the week traded on, the excitement dwindled, and traders began to look to the market's immediate fundamental position for direction -- which is what led the market lower as both fed cash cattle prices and boxed beef prices continue to seasonally decline.

Last week, Northern dressed cattle traded at $365 to $369, but mostly at $365, which is $6.00 lower than the previous week's weighted average. Southern live cattle traded at mostly $237, which is $3.00 lower than the previous week's weighted average. Last week's negotiated cash cattle trade totaled 56,622 head. Of that, 67% (37,689 head) were committed to the market's nearby delivery, while the remaining 33% (18,933 head) were committed to the market's deferred delivery option. And throughout the week, choice cuts fell $12.84 to average $376.60, and select cuts fell $11.05 throughout the week to average $356.86.

Although feeder cattle supplies remain historically thin and there are still plenty of bullish realities to point to in the market today. It's likely the seasonal downturn of both boxed beef prices and fed cash cattle prices will lead the futures market to struggle again this week.

And unfortunately, the spot December live cattle contract did close below the market's 40-day moving average. This could trigger additional down pressure for the market, as traders are looking for signals and cues to help them determine which way the market should trade next.

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

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