AgResource Daily Cattle Analysis: Cattle futures closed lower last week, and a steady/weaker outlook is offered for early trade this week. December cattle collapsed on Friday as the market fell through an open chart gap, and traded under the week’s cash trade. The November Cattle on Feed report will be released at the end of the week, with the Livestock Slaughter and Cold Storage reports scheduled for release next Wednesday.
Sales in the negotiated cattle market last week were generally quoted around $124, or near steady with the previous week’s 5 area average price. While packers were able to keep their cattle costs near unchanged for the week, they were able to move beef prices higher. The choice cutout value was up $5.11 to $213.85/cwt and select boxes gained $1.43 to $194.51. Estimated slaughter margins are at $99/head versus $128 last year and the 5 year average of $5.
Cattle basis is back to positive, with last week’s cash trade nearly $4 over December. Initial support for this week is at $119-120, and then the 50 day moving average near $117. Our view stays bearish on rallies for the 1st quarter with rallies back to $130 February or better to offer the next sales opportunity.
South American Weather Pattern Discussion: The EU & GFS models kick of the week in good agreement on the 10-day South American pattern, which is viewed as non-threatening. We do mention that another week will pass without meaningful rains falling across Central Argentina, and should this pattern continue into early December, no doubt there will be more discussion about sub-trend corn yields there.
Through the week ahead, South American rainfall will be confined to the northern third of Brazil, which includes Mato Grosso and fringe producing states in the far north. A fairly dramatic expansion in rainfall occurs beginning Sun/Mon and lasts throughout the 6-10 day period. 10-day accumulation is at below, and if next week’s forecast verifies rainfall into late November in Brazil will be very close to normal for the period.
The GFS this AM includes better rain chances in parts of Central Argentina in the 11-15 day period, but this moisture needs to be pulled forward in time before there’s any confidence in that solution.
