Story courtesy of Brian Winnekins, at affiliate WRDN-Durand, WI
Late last week, we saw a retreat in the cattle markets. Bryan Doherty, the senior market advisor for Total Farm Marketing by Stewart-Peterson, says it appears the funds are backing off long positions in the market.
“You’re seeing what I think is some exit by funds,” says Doherty. “They’ve been strongly long in the cattle, and it flipped over last week. You’ve had weaker cutout values as well, and they’ve taken a pretty good hit this week. So, the combination of the two puts the market in motion. It uncovers Sell-Stop orders, which are sales that aren’t necessarily intended, but they happen when you’re either exiting a long position or establishing a new short position. So, you get a combination of things, and that’s why sometimes the market move really fast. It’s because you’ve got different angles all coming together at one point.”
What does this mean for the immediate future of the cattle markets given the still strong demand for beef.
“I’m not concerned that there’s going to be a whole bunch of shorts coming in on the big-picture perspective,” says Doherty. “From the near-term picture perspective, I am concerned that there’s technical weakness in front of the market and money flow, but from the supply side, they just aren’t there, and the cattle inventory report this last week confirmed that we’re down one percent from last year. When does this herd stop shrinking? That’s a good question.”
The beef supplies are still tight according to Doherty. “You know, the market doesn’t move in your timetable or mine, but when you look at who’s producing calves, there’s too much bird in hand right now, so I think things stay tight,” says Doherty. “The auction barns are still active. Still? They’ve been incredibly active with high prices. What’ll probably cool the market down a little bit is some of these last batches of feeders that have been bought at record-high prices. The producer bought them on hope. There was nothing to lock in there as a profit for most, at least, so that leaves the market vulnerable to a lack of new buy interest.”
