The Hightower Report

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

June cattle slipped lower overnight but saw a recovery to trade slightly higher late in the overnight session. Ideas that recent price increases in beef will drive up retail prices at the grocery store level to record highs and that consumer demand will slow helped to pressure the market in recent days. Traders see consumers reluctant to pay up for higher-priced steaks for the barbeque season ahead and this may slow beef movement some. In addition, a forecast for cold and wet weather in the northern and central parts of the country for this coming weekend and maybe next does not bode well for a jump start to the higher demand season. June cattle closed slightly lower on the session yesterday and moved to the lowest level since March 25th. This was a lower close for the 6th session in a row after the market posted a contract high on April 4th. The early weakness brought about talk that the market is a bit oversold. Ideas that hefty placements of cattle last fall will result in better short-term supply of market-ready cattle coming off of feedlots helped to pressure and traders look for weaker cash cattle trade this week. The estimated cattle slaughter came in at 128,000 head yesterday. This was down from 129,000 last week but up from 126,000 a year ago as this time. Boxed beef cutout values were down 62 cents at mid-session yesterday and closed 49 cents lower at $190.10. This was down from $191.68 the prior week. For the USDA supply/demand report on Friday, 2011 beef production was revised slightly higher (20 million pounds) but a decline in imports (60 million) and an increase in exports (50 million) more than offset the production increase. This caused per capita supply to drop to 58.3 pounds from 59.6 last year and 61.1 pounds in 2009.

TODAY’S GUIDANCE: Technical traders sometimes say that a market is a buy on the 7th day down from any significant high and that would be today. However, the short-term supply situation looks adequate and much of the supply “bullishness” of the market is being pushed down the road. Poor weather in the southern plains is pushing more cattle into feedlots and non-fed cattle slaughter is also higher than expected. Eventually, replacement cattle for feedlots will be very hard to find and beef production could be further reduced with high corn prices. While June and August cattle may have more negative short-term news to absorb, deferred contracts are likely to hold shallow support. Bigger placements last fall look to hit the market in the weeks ahead so traders see the short-term supply as a slightly negative force.

TODAY’S MARKET IDEAS: June cattle may see a recovery bounce given the discount to the cash and the short-term oversold condition but for now, don’t expect more than a bounce. Resistance for June cattle is at 118.17 and 118.82 with 116.15 as support.

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

April cattle is now up as much as 9.3% from the March 16th lows to post new all-time highs. Open interest is also on the rise and funds have been active buyers to pull futures to a premium to the cash market. The surge in the cash market this week, however, leaves April in-line with the cash market and June at a discount. Consumer demand in the US has been less impacted by the higher price than traders have expected and Japanese demand for chilled, ready to eat (and/or stock in retail stores) beef and pork has also been stronger than anticipated. Traders will monitor the weekly export sales news this morning for further clues on demand. April cattle closed sharply higher on the session yesterday and rallied to a new all-time high for the spot contract for cattle with a high of 120.80. Cash cattle from the southern plains traded $6.00-$7.00 higher on the week to $120-$121 with some cattle from Kansas trading as high as $123.00. The market pushed sharply higher on the session early in the day but after a fairly sharp set-back, the market was back up near the highs into the mid-session. News that cash cattle was trading at $120 in Kansas and Texas early in the day helped to support the market with cash moving above most futures contracts and cash trading at a new all-time record high. Nebraska cash traded sharply higher late Tuesday and this helped support the market. The market found additional support into the mid-session on news of higher beef prices. A strong stock market late in the day was also seen as a positive demand factor. News from two of the largest meat companies in the US that Japan has been buying chilled meat since the earthquake helped to provide underlying support. Boxed beef cutout values were up $1.15 at mid-session yesterday and closed 69 cents higher at $188.18. This was up from $188.14 the prior week. The previous high was $189.05 on March 22nd. The estimated cattle slaughter came in at 124,000 head yesterday. This brings the total for the week so far to 376,000 head, up from 372,000 last week at this time and up from 375,000 a year ago.

TODAY’S GUIDANCE: While the market is in an overbought technical condition, open interest continues to push higher and traders do not see evidence that recent high prices will spark higher supply in the future. In fact, the opposite is true for now as cow and non-fed cattle slaughter has been running well above normal for the past year or more and replacement cattle will be difficult to find for feedlots for this spring. This may tighten feedlot supply going foreword. The market is in a steep uptrend and the bull market is likely to remain in tact. The next phase is likely to emerge from the lack of supply of replacement cattle for feedlots.

TODAY’S MARKET IDEAS: June cattle buying support is at 118.10 with 120.80 and 122.45 as next upside targets.

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

The technical action is weak and sluggish cash market news this week plus hog/cattle spreading are factors helping to pressure. Fears of slower global growth and a large spec net long in cattle are also factors which could spark increased selling. However, futures have already shifted to a discount to the cash market and a strong trend for beef prices could help support the cash market tone soon. April and June cattle closed down the 300 point limit yesterday as traders do not see export demand recovering quickly from the macro economic events of the past week, and this drove June cattle to the lowest level since January 12th. The market traded slightly higher on the session early in the day but renewed concerns for the economy led by a sharp break in the US stock market helped to pressure. Technical selling emerged to drive the market sharply lower into the mid-session with talk that the last COT report still showing funds net long near 106,000 contracts helping to pressure. In addition, ideas that Japan will slow imports short-term added to the negative tone. Japan was the number three export market for US last year. Open interest was down 3,086 contracts Tuesday and down 8,085 contracts yesterday suggesting a long liquidation trend is developing. The USDA attache report from China indicated lower domestic production this year by 2%, which might spark an increase of imports to 55,000 tonnes, up 38%. The estimated cattle slaughter came in at 122,000 head yesterday. This brings the total for the week so far to 361,000 head, down from 384,000 last week at this time and down from 375,000 a year ago. Boxed beef cutout values were up $1.13 at mid-session yesterday and closed $1.13 higher at $187.63. This was up from $176.87 the prior week and is the highest trade since October 22nd, 2003.

TODAY’S GUIDANCE: There has been significant technical damage done to the June cattle chart on the collapse from the highs this week and we remain concerned with the potential for further long liquidation selling because the spec net long position is high and so is open interest. Japan is a major importer and short-term shipments may slow.

TODAY’S MARKET IDEAS: Outside markets are positive today and the market seems to have the fundamental set-up to push higher into the spring but we remain uneasy with the technical set-up. The next key support for April cattle comes in at 109.45 and it will take a close back over 111.60 and a move over 113.52 to help shift the chart pattern more positive.

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

The futures market was under pressure again yesterday as cattle followed the hog market down and also followed a general tone that high energy prices will eventually help cause beef prices to flounder. However, the market has not seen beef prices weaken and the market pushed to the highest level in about 7 1/2 year yesterday. April cattle closed lower on the session yesterday with most of the damage done in the first hour of trade. Traders see a little larger showlist this week but traders suspect that the high cash prices of last week ($113.00) will help bring out any cattle close to market weight. April cattle traded higher early in the session finding support from news that the beef market traded at the highest level since July of 2008. In addition, the market saw positive outside market forces and a firm cash market last week as reasons for the higher trade early in the day. However, a turn down in the stock market and a sell-off in other agricultural markets helped spark a long liquidation sell-off into the mid-session. Ideas that higher energy prices will eventually pinch consumer spending on higher-priced beef cuts helped to pressure the market. The estimated cattle slaughter came in at 129,000 head yesterday. This was up from 126,000 last week and up from 121,000 a year ago as this time. Boxed beef cutout values were up 75 cents at mid-session yesterday and closed 63 cents higher at $174.42. This was up from $171.40 the prior week and is the highest beef market since October 27th of 2003.

TODAY’S GUIDANCE: The market seems to have the short-term cash news to remain in an uptrend; especially if the beef market can hold on to recent gains. The higher beef will likely encourage higher cash cattle this week. A set-back in financial markets could cause some follow-through selling and a break would represent a short-term buying opportunity. Traders have tried to pick a top in the beef market several times in the past few weeks but so far, beef prices keep moving higher.

TODAY’S MARKET IDEAS: Buying support for April cattle comes in at 113.60 and 112.90, with 115.00 and 115.40 as resistance. We still can not rule out an eventual run to 118.87.

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

Traders remain nervous with weak outside market forces and some concerns for a weaker tone to the global economy and its impact on consumer spending. The surge in energy prices in the past has had an impact on consumer spending patterns with higher priced-beef cuts seen as an easy item for consumers to cut back on when gas prices rally. So far, there is not a sign of slower demand as beef prices are in a short-term uptrend. There were no deliveries overnight and traders see a firm tone to the cash market this week. April cattle rallied late in the session yesterday to close higher on the day. It found support from a late rally in corn and managed to counter the bearish trend of the past couple of days. The market had been down earlier on broad economic concerns in the wake of the recent unrest in North Africa and the Middle East, most recently Libya and Bahrain. There are also concerns about the discord drifting to other key oil producers in the region, including Saudi Arabia. This had sparked sharp rallies in crude oil and certain flight to quality instruments like US Treasuries and precious metals, but it sparked selling in the stock markets and other commodities as traders worried about the state of the global economy. But higher boxed beef prices at midday suggested demand was holding up better than expected, at least in the near term. The estimated cattle slaughter came in at 129,000 head yesterday. This brings the total for the week so far to 372,000 head, down from 384,000 last week at this time and down from 373,000 a year ago. Boxed beef cutout values were up 56 cents at mid-session yesterday and closed 89 cents higher at $170.45. This was up from $168.45 the prior week and is the highest beef market since February 4th.

TODAY’S GUIDANCE: Outside markets could help drag the market lower over the near-term if the bearish tone for the global economy holds. The prospect of rising energy prices could become a negative big-picture theme and spark long liquidation selling for agricultural commodity markets. Sellers were active early yesterday but the support was too strong and the market recovered. Look for another attempt today as a weak US equity market and another surge in gasoline prices could spark selling. The futures premium will be tougher to rationalize in an environment of long liquidation selling in economic sensitive markets such as cattle. The firmer tone for the beef market is a positive.

TODAY’S MARKET IDEAS: New buyers can wait for a more significant set-back to enter. April cattle support at 112.90 held yesterday but there could be more selling today with additional support at 112.32. Keep 116.60 and 118.87 as eventual upside objectives.

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

News of 20 deliveries against the February futures and weakness in equity markets overnight may be factors to spark some additional long liquidation selling. April cattle closed near unchanged on the session yesterday but down about 130 points from the early highs. The market traded moderately higher on the session early and above Tuesday’s highs to 112.60 but was back down to near unchanged into the mid-session. The surge higher in corn prices helped to support deferred contracts as traders see lower weights and less “on-feed” supply ahead due to the high corn values. A lack of deliveries helped to provide some underlying support and traders see snow and cold weather as stressful for feedlot cattle areas of the western and southern plains. This adverse weather likely reached a peak overnight due to very cold weather but temperatures are expected to rise significantly into the weekend. The estimated cattle slaughter came in at 126,000 head yesterday. This brings the total for the week so far to 372,000 head, up from 357,000 last week at this time and up from 361,000 a year ago. Boxed beef cutout values were up 8 cents at mid-session yesterday and closed 5 cents lower at $169.77. This was down from $172.73 the prior week and is the lowest since January 14th. Traders await news on the cash market for direction but with the premium of futures to the cash market, it will be important to see a higher trend in cash.

TODAY’S GUIDANCE: The technical action remains weak and beef prices are sluggish and some weakness in outside markets could spark additional downside if speculators remain in a long liquidation mode. With a bullish longer-term view for the market, traders might consider a buy calls/sell futures strategy with a near neutral delta and then the trader will be in a position to lift the futures “if” a more significant break occurs.

TODAY’S MARKET IDEAS: April cattle have drifted under the uptrend channel and have yet to reach an oversold condition. Support comes in at the 110.75 to 110.45 zone with 118.90 as a longer-term objective.