AgResource Daily Cattle Analysis: Cattle futures closed mostly lower at the end of Tuesday, and a weaker outlook is offered for early trade this morning. February live cattle were on both sides of unchanged through the day, trading higher in the first half of the day morning and then falling into the red in the last half. At the close, December was up a nickel and the rest of the market was $.65-.875 lower. Feeder futures gave back Monday’s gains against the fat market, with January and March both $2 lower for the day and back under respective 100 day moving averages.
Beef cutout values were higher Tuesday morning and remained positive into the afternoon beef report. The choice value was up $.89 at $209.08 and the select was $1.09 higher at $186.63. Choice ribs jumped nearly $8 for the day on late holiday demand, to $408/cwt or the best since last June.
Very thin sales reported on Tuesday were in a broad range of $117-123 with a weighted average steer price of $119.57, according to the USDA’s Afternoon Slaughter Cattle review. Confirmed sales totaled just over 1,000 head, and not enough to confirm a market trend for the week. Beef prices were again higher, though the general tone at the CME at the end of Tuesday was weaker.
February cattle was able to build support at or just above technical targets from $119-120 on Tuesday. Key for today is whether the market is able to build on Tuesday’s late support, or whether a further correction will unfold. Were the market to close under $119, we see the next technical targets down at $116, while a recovery back to $125 or better offers the next 1st quarter sales opportunity.
South American Weather Pattern Discussion: The major forecasting models remain in good agreement through the next 10 days. There are some signs that regionally better rainfall could develop in Central Argentina thereafter, but a few more days are needed to boost confidence in any meaningful pattern change. Otherwise, dry weather will continue across Argentina, dryness will be expanding northward across Southern Brazil. And temps in Argentina will have a warm/hot bias moving forward, and high readings in the 90s will be widespread beginning this weekend. The EU model’s max temp forecast on Saturday is below.
The only positive is that normal/above normal rainfall will be ongoing across roughly 60% of Brazil’s soy belt through the period. Yield potential is rising in Mato Grosso, Mato Grosso do Sul, Goias and Minas Gerais. But there’s no doubt regular rainfall will be needed elsewhere by late month. Note that 16-30 day guidance maintains dryness in Argentina.