Demand Concerns Slam Cattle Futures

April 5, 2012 01:14 AM

What Traders are Talking About:

* Demand concerns slam cattle futures. Front-month April live cattle futures have plunged nearly $14 from the all-time high posted in late February amid demand concerns. Rising gas prices and potential negative fallout from the lean finely textured beef issue have traders worried consumers will shun beef for cheaper pork and poultry. The timing of the demand concerns is poor as the grilling season is off to an early start due to record high temps across much of the country. Given the demand concerns, cattle futures are trading sharply below the cash market, which is highly unusual considering market-ready supplies are relatively tight. The big discount futures hold to the cash market signals attitudes are currently very bearish.

The long and short of it: The downside in cattle futures is overdone, but a strong recovery rally won't get started until the boxed beef market indicates prices have dropped perceived "value" levels. Wholesalers and retailers are going to be very cautious buyers as they are uncertain what the consumer response is going to be to beef at current price levels.

* Grain, livestock markets closed Friday. Livestock markets close early today ahead of the long, holiday weekend, while grain markets will observe normal trading hours. Most markets, including agriculture futures, are closed for Good Friday, but government offices are open since it's not a federal holiday. Grain markets will reopen with the overnight session Sunday, April 8, while livestock markets will remain closed until the normal open of the day session on Monday, April 9.

* March jobs data out Friday. While many markets are closed for Good Friday, the Labor Department will release March jobs data Friday at 7:30 a.m. CT. The average guess of economists polled by Reuters expects non-farm payrolls increased by 203,000 last month. That would be down slightly from an increase of 227,000 jobs in February. The unemployment rate is expected to hold steady at 8.3%. On Wednesday, ADP reported the private sector added a slightly better-than-expected 209,000 jobs in March.

The long and short of it: The bond and foreign exchange markets are open for an abbreviated session Friday, so the jobs data can be factored into those markets. But the stock market is closed, so any price reaction from equity traders will have to wait until next week.


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