** AgResource Daily Cattle Analysis: Cattle futures ended last week lower, and a steady/weaker outlook is offered for early trade this morning. Cattle and feeder cattle markets were lower at the end of last week’s trading despite steady cash trends; though the December Cattle on Feed report is viewed as bearish, which looks to pressure early week trade.
The December Cattle on Feed report showed a much larger than expected November placement rate, at 114% of last year versus expectations of 106%. Total December 1 cattle on feed supplies were reported at a 108% of year ago versus estimates of 107%. However, the report confirmed December 1 on feed at a 6 year high, or the largest since 2012.
Initial technical targets for February cattle are just below the current monthly low, and then near $116. Our view is bearish cattle on rallies in early 2018, and a recovery back to $124 April or $117 June should be used for 2nd quarter feedlot hedges/sales.
** South American Weather Pattern Discussion: The US and EU weather models are in fair to good agreement. A trend of below normal rainfall is expected for Argentina and S Brazil for the next 10-14 days. Temps will be well above normal across Argentina and S Brazil this week with highs in the 90s to lower 100s, with a cooling trend on the weekend, before rewarming next week.
The weekend cool frontal pass could produce a few lite rains with totals estimated in a range of traces to .6” across 55-60% of the cropping areas of Argentina and S Brazil. Note that the weekend frontal pass is the only chance of meaningful rain in the next 10 days.
The attached graphic is from the EU model and it reflects its rainfall forecast over the next 10 days.
We note that a below normal rainfall trend will also persist across the northern half Brazil for the next 2 weeks. The trend has to be carefully monitored as the soy crop enters the reproductive phase. Temps across Brazil look to be variable, but average near normal for the next 10 days.
Drought is not a process of no rain, but a trend of persistent below normal totals with periods of intense heat.
** EU Weather Model 10 Day Rainfall Totals; Limited Across Argentina and S Brazil:
