Granstra’s cattle call: Volatility expected

Cattle futures closed the week lower for the first time in 8 weeks for live cattle and 7 weeks in feeders. Cattle futures have not been stochastically oversold since June. This market has been looking for a reason to correct for weeks. Maybe a slight pull back in cash can get it done? Open interest remains high. If this short term down trend continues, fund will likely liquidate as key support levels are challenged. This summer has been so euphoric that futures can break a very significant amount before long term uptrend lines are challenged. I anticipate volatility to continue to increase.

Cash in the north was steady to lower at 242-245. Southern cash was steady to stronger at 242-243. The premium that the north held to the south is now gone. I anticipate that trend to continue. Several on feed reports reflect supply concerns in the south. Futures will have to digest this new reality. Weights are trending higher with feedlots losing incentive to stay current as basis is gone and replacements are high.

Cash feeders continue to break records in some locations, but I do hear of some weaker prices as the week continues. I anticipate that big breaks in cash feeders are going to be hard to come by until feedlots see some red ink on closeouts. The southern border remains closed with no projected date to open, keeping supply concerns alive and well.

Dallas Granstra

Kooima Kooima Varilek Trading

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