AgResource Daily Cattle Analysis: Cattle futures were mostly firm at the end of quieter trade on Monday, and a steady/weaker outlook is offered for early trade this morning. August cattle had resistance last week over $118, which went unchecked through Monday and was followed by a lower close, while the rest of the market finished firm. Cash markets were quiet through Monday, while beef prices were lightly mixed with choice down $.30 and select up $.39.
Pasture conditions in the Dakotas continue to worsen, with poor/very poor ratings in SD jumping 9% last week to 68% P/VP, while ratings in ND were up 5% to 75% P/VP. Ratings in ND are the worst for mid-July since NASS began reporting the data in 1995, while ratings in SD match the 2002 Plains drought. Forage prices look to remain high in the year ahead, and limited pasture and hay is expected to keep feeder cattle placements up.
October and December cattle each closed at 5 week highs, and our view is neutral on a further rally amid an outlook for record 4th quarter beef production following big summer placements. Support in August cattle is expected on a break back to $114, while upside technical targets are scattered between $119-121.
US Weather Pattern Discussion: The US & EU models are in much better agreement today, with the GFS having trended drier across the E Plains and Midwest next week. There’s no real change to the pattern ahead, with upper level high pressure of varying degrees to dominate North America. This will keep the mean position of the jet stream largely north and east of major producing areas, allowing soil moisture to erode further west of the MS River. This loss of soil moisture, in turn, will support bouts of heat there into the opening days of August. The newly established short term drought indicator is attached.
Isolated soaking showers will impact E SD, MN and WI over the next few days. Totals are pegged as high as 2-4”, but we mention this system has been pushed a bit farther northward than previous runs. As such, much of IA will miss needed rainfall, and should the 6-10 day forecast prove correct, IA will see very little moisture through the balance of July. Abnormal dryness will be expanding in the next 10 days.
