** AgResource Daily Cattle Analysis: Cattle futures closed higher at midweek and a firm outlook is offered for early trade this morning. After a higher start on Wednesday, February cattle had support against unchanged and again on a midday break, which carried the market higher into the close. Cash markets have yet to trade this week, while technical/fund buying continues to develop on breaks. Feeder futures marked slightly better gains, with January closing up just over $1 while the cash feeder index was $1.55 higher at $156.81. Spot feeder futures look to be aiming to close a chart gap left from the November expiration, just over $157.
Cash cattle went untraded through midweek, though initial bids surfaced on Wednesday. Packer buyers were reported to be calling with bids at $117-118, while feedlots passed. Asking prices for the week’s showlist are thought to be at $121 or better, and the outlook at midweek looks to be for no worse than steady trade, with $1-2 better possible.
However, the beef market continues to drop this week, with the choice/select spread now narrowing, and likely confirming the start of a seasonal correction. The choice cutout value was down $2.08 at $206.55 (-$4.44 for the week), and the select value was $1.36 lower at $185.84.
A 50% retracement of the contract high to last week’s low in February cattle is at $127.30, with the next major level of resistance just over $129. Another $2-4 rally at the CME will offer the next hedging opportunity for 1st quarter feedlot production. Longer term, June cattle over $120 present a chance to start on summer hedging.
** South American Weather Pattern Discussion: The overnight forecasts are little changed from recent runs for Argentine and Southern Brazil over the next 2 weeks. Cordoba Province in Western Argentina received .7-1.50” of rainfall yesterday with other amounts mostly under .5”. A second chance of rain exists for W Argentina on the early weekend with most other areas seeing just a few spits of moisture. The forecast longer term remains arid and soil moisture declines will be worsening with time for Argentina and Southern Brazil. The EU model 10 day rainfall graphic is attached.
The forecast models still do not have much rain with a secondary frontal pass on the weekend amid low humidity levels. There could be a few lite showers of .50” for far Western Argentina, but other areas will be short changed. The drying trend will extend northward into Parana Brazil, and crop concerns will be growing. Central and Northern Brazil will receive 3-9.00” of rainfall over the next 10 days. Some farmers here are starting to complain over the need for more sunshine and less rain to limit disease pressures. More seasonal temps will be noted throughout S America with highs ranging from the 80’s to low 90s.
