** AgResource Daily Cattle Analysis: Cattle futures closed sharply mixed on Monday, and a steady outlook is offered for early trade this morning. A higher start to the morning in February cattle quickly found profit taking that had the market back below unchanged by midday, while December cattle closed up more than $1 and inline with last week’s cash trade. The cash outlook for this week is no better than steady, while the CME trade is expected to be back and forth ahead of Friday’s USDA On Feed report.
ERS’s monthly Livestock Outlook on Monday estimated 2nd quarter domestic per capita beef disappearance at 15 Lbs, fractionally lower than the November estimate, but 1.1 Lbs more than a year ago and the largest since 2010. The price model in the chart projects an average 2nd quarter steer price of $108, while the USDA’s own forecast is at $112-122. We are not quite as bearish as the model projects, but the CME this week is offering feedlots the chance to hedge a 2nd quarter average near $120 (with normal basis). Our view is bearish on rallies in early 2018, and a recovery back to $124 April or $117 June should be used for 2nd quarter feedlot sales.
** South American Weather Pattern Discussion: The US and EU weather models are poor agreement on the forecast for the next 10 days. Since the midday forecast of yesterday, the forecast models have been differing on the amount of rain that will fall across Argentina and RGDS in S Brazil and the eastern areas of Northern Brazil. The GFS is too amplified with a Low Pressure Trough and likely in error in our view, while the often times more correct EU model offers just .15-1.00” of rainfall in the 10 day period. The attached graphic is from the EU model and it reflects the drier 10-12 day forecast for Argentina and S Brazil.
A frontal pass overnight produced less than expected rainfall of traces to .5” across the far eastern areas of Argentina. Missed again was the western 2/3’s of the country. And compared to what rainfall was expected to fall 10 days ago, the past weeks precip has been far less, leaving many producers to keep waiting for a planting rain.
There is still a chance for a few showers across N Argentina and S Brazil today with a better chance on Friday. The combined rainfall looks to range from .1-1.00” which favors the north and is far less than what is needed to end the drought.
** EU Model 10 Day Argentine Rainfall Forecast:
** December 1-19th Percent of Normal Rainfall: Still far too Dry!
