** AgResource Daily Cattle Analysis: Cattle futures closed lower on Monday, and a steady outlook is offered for early trade this morning. A steady start to the week immediately found follow through liquidation, that kept prices under pressure into late in the day. At the close, February was nearly $3 under early week cash trade. It was a rare Monday start for the week’s cash business, as hedged feedyards took advantage strengthening basis and sold cattle into packers bids at $120 and then covered hedges $2-3 lower. Overall trading volume was not thought to have been significant, but the business has likely set the trend for the week.
The Prior Week Slaughter and Contract Purchases report showed that packers bought just over 40,000 head of cattle last week, with much of the business for August and beyond. The most active nearby month for sales was in May, where packers booked 3,277 head, taking total May deliveries to just over 120,000 head, or near unchanged from the same time a year ago. Total cattle contracted (to April ’19) amounts to nearly 1.6 million head, slightly ahead of both last year and the 5 year average.
February cattle fell and closed under the 200 day moving average on Monday, with the next downside target near $116.
** South American Weather Pattern Discussion: The US and EU weather models are in poor agreement on the 10 day forecast. The GFS forecast has gone wetter while the often more correct EU model is similar to prior forecast. Our forecast lean is to the EU model based on its ongoing solid track record.
A trend of below normal rainfall is forecast for Argentina and NE Brazil into January 20th. Note the areas that we have circled as being the driest areas for moisture in the next 10 days. 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.
The long range weekly EU models keep this rainfall trend intact for another 2-3 weeks with the dryness in Brazil starting to push westward. The drying trend has to be closely watched with crops in their reproductive phase across N Brazil.
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.