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CME: Futures Rally into Close to Finish Higher, Monday

21 May 2013

US - Live cattle futures opened slightly lower but rallied into the close to finish 25 to 72 1/2 cents higher in all but the far-deferred contracts, which ended weaker.

Early weakness was tied to followthrough from Friday's losses as well as the bearish Cattle on Feed Report, write ProFarmer analysts.

But realization the report was already factored into prices, especially with June live cattle holding around a $5 discount to last week's cash trade, triggered short-covering.

The sharply higher close after early weekness and the reversal action for August cattle from an oversold condition might be seen as a positive development for the market, write market analysts at CME.

Closing higher after a bearish USDA update may also be seen as a positive.

June cattle traded lower early in the session and down to a low of 118.87 but were unable to take out Friday's lows and managed to trade higher on the day into the mid-session. August cattle have posted contract lows and are trading higher into the mid-session.

With the oversold condition, a higher close and reversal today could attract significant short-covering.

While traders see the Cattle-on-Feed report as a negative, the break last week drove futures to a steep discount and many traders believe the report bad news was already priced. Many traders see the beef market as much stronger than expected with beef surging to new all-time highs again on Friday.

This has helped to push up packer profit margins and packers may have incentive to pay-up to own inventory this week.

Boxed-beef cut-out values were up 45 cents to $209.96 at mid-session as compared with $205.13 last week at this time and this is yet another new all-time high.


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