** AgResource Daily Cattle Analysis: Cattle futures recovered on Tuesday from oversold technical levels and the premium of the cash market to February futures. A steady outlook is offered for early trade this morning.
Cattle and feeder futures have fallen sharply since late last week and a pause in the break is expected. However, rallies will be hard fought against rising fed cattle supplies thru mid year.
The arctic cold of last week has lowered carcass weights as cattle fought to stay warm. However, out weights are still above last year and the historical averages. This will add to the US beef supply going forward with most feedlots telling ARC that conditions today are favorable for cattle feed conversion rates.
Beef prices edged higher on Tuesday with choice boxes trading $.29/cwt higher at $210.49 and select up $.32 at $203.69. The beef market should be very close to a seasonal top with US cattle slaughter rates to expand going forward. February cattle futures fell and closed under the 200 day moving average on Monday, with the next downside target near $116. ARC remains bearish longer term.
** South American Weather Pattern Discussion: The US and EU weather models are in poor agreement on the 10 day forecast. The GFS forecast remains wetter while the often more correct EU model is similar to its prior drier forecast. Our forecast lean is to the EU model based on its ongoing good track record.
A trend of below normal rainfall is forecast for Argentina and NE Brazil into January 21st. The southern 2/3’s of Argentina and northern half of Brazil will be the driest. Temps will be well above normal across Argentina and S Brazil with highs ranging from the 90s to lower 100s this week and easing back to the 80’s to mid 90’s on the weekend. The heat will also be building across NE Brazil next week which has to be watched. The retreat of rainfall across N Brazil is unusual in early January and it relates to La Nina’s strength.
Limited rains will fall across the heart of the ag areas in Argentina for the next 10 days. Rainfall totals of .25-1.00” and high temps in the mid 80’s to lower 90’s won’t be enough to counter evaporation leading to further soil moisture declines. Our concern for South America crop yields persists amid 2 areas of concern.
