Grain Market "2 Minute Drill" (Video) and Livestock Roundup 10.26.17
Oct 26, 2017
Check out this afternoons "2 Minute Drill" from the floor of the CME
Beef exports came out before the opening bell today and showed weekly export sales of 16,900mt, this was up 25% from the previous week and is roughly 7% above the four-week average. Cattle futures were mixed on the open but found strength midway through the day. The cash trade has been nonexistent this week with sellers passing on the 111 bids, offers have been quoted from 114 and some chatter up to 116, this would be up $3-5 from last weeks. The expectations are high so there is room for disappointment as we see nearbys and deferreds at or near contract highs. Late Friday afternoon cash trade is what many market participants are expecting. As it stands right now, the demand story is trumping the supply side debate. Funds are thought to have been adding to their long position through the week, we will get a better idea in tomorrow’s Commitment of Traders report which will show activity through Tuesday.
PM Boxed Beef Choice Select
Current Cutout Values: 202.37 191.91
Change from prior day: 2.16 -.48
Choice/Select spread: 10.46
Live Cattle (December)
December live cattle have shown their power this week after the bears attempted to break the market down early in Mondays trade. The inability to break below technical support on the back of a bearish cattle on feed report have only fueled the funds buying interests over the past four sessions. Todays close above technical resistance suggests we could see additional upward momentum to test the contract highs of 122.85 in the intermediate term. With that said, the market is slightly overextended with the RSI at its second highest level since the beginning of May. As mentioned in yesterday’s report, volatility often times invites volatility, so an overbought market could prompt long liquidation into the weekend. Previous resistance now becomes technical support, that comes in from 119.175-119.85.
Resistance: 122.85-123.20****, 125.124-125.50**, 127.65***
Support: 119.175-119.85**, 117.375-117.725**, 114.425-115***
Feeder Cattle (November)
November feeder cattle staged an inside day (just by a hair) and closed within our resistance pocket. An inside day is when the days price range is contained within the previous day’s range. Often times this can lead to consolidation. Tomorrows price action is likely to be significant in setting the tone for next week’s trade. The market has rallied violently off the bottom end of the range which puts us right near the top end of the range and contract highs of 158.25 we saw just a short month ago. The RSI is reading just above 63, typically a ready over 70 is a sign of exhaustion to the buy side. If we do stall out on moderate signs of exhaustion, we could see some long liquidation into the weekend. First technical support comes in down at 155.55.
Resistance: 157.65-158.025**, 160.90**, 165.225****
Support: 155.55**, 149.70-150.20***, 147.30-147.94****
Lean Hog Commentary and Technicals (December)
December lean hog futures traded both sides of unchanged today but managed to stage another strong session at the close. The December contract closed at their highest level since July and rest just .60 away from contract highs. We were looking for additional consolidation lower on Mondays failure, but the bulls have been determined to drive prices higher. We continue to feel that there is an opportunity at these levels to look for a lower trade with the risk being defined above new contract highs. A consolidation back towards 61.50-61.90 would be the intermediate term objective so long as we do not see a major fluctuation in the fundamental backdrop.
Resistance: 65.20-65.675***, 67.825**, 71.325**
Support: 61.50-61.90***, 60.14**, 55.775-56.20****