** AgResource Daily Cattle Analysis: Cattle closed higher on Tuesday and a firm outlook is offered for early trade this morning. Cattle futures opened steady on Tuesday and were then able to build on last week’s late demand, to mark good gains at the start of the week. At the close, February was back above the 200 day moving average, while April cleared $120.
Monday’s Contract Purchases data showed very light business through last week. Packers added just over 22,000 head to their forward contract inventory, for a combined total of 1.6 million contracted for deliveries out to April 2019. The largest volume of business done was for next December, though packers were also able to add close to 2,500 head for February. However, total contract inventory for February remains light, and the lowest since the USDA began reporting the data in 2010.
In the near term, we see cattle futures for the 1st quarter as fairly price, though strong rallies should be sold. Technical targets for February are at chart gaps left through last week’s trading, just above $119 and then $122. It’s the 2nd quarter, where we see cattle futures as over valued. June cattle back to $115-118 should be sold.
** South American Weather Pattern Discussion: An unexpected T storm complex formed overnight across S Cordoba in Argentina and produced .5-2.50” of rain across the southern third of the province. The rains are trying to push northward as the system weakens this AM. The rest of Argentina was dry.
The EU and GFS weather models are in better agreement with the GFS coming around to the thinking of the EU model. Dryness and warming temps is expected across Argentina for the next 10 days. Any rain that falls looks to be no more than .1-.75” with soil moisture in decline amid budding heat. And dryness is starting to become an issue for NE Brazil and areas farther west as 4 weeks of below normal rainfall has dropped soil moisture to short levels. The EU model’s 10-day cumulative rainfall outlook is attached.
N Brazilian precip will be limited in the next 10 days amid a high pressure Ridge aloft. Whether the Ridge can hold this position will be closely watched in early February as soil moisture is in rapid decline. In between the N Brazilian and Argentine dryness, heavy rain looks to drop across far N Argentina and the southern third of Brazil.
** EU Model 10 Day Rainfall Forecast:
