There was a nice signal to long LE yesterday 2 hours after market opened. and another nice reversal down signal after that. day range was great at 4.3
Ahh, here's today's commentary on the EU deal and yesterday's action... …"Cattle owners will attempt to change the tone of the market by sticking to fundamentals rather than the latest trade war news but futures traders are forced to deal with the volatility that ranged futures prices over $4 in the live cattle futures and $7 in the feeder cattle futures. Navigating into or out of futures positions is a throw of the dice. China isn't purchasing much of our beef now and the EU purchases are negligable when compared to total exports. The ban announced over the weekend will likely re-route much of the beef through the black market in Vietnam into China. The Chinese seem to have given up on a trade deal with Trump and are content to wait out the election next year. The U.S. labeled China a currency manipulator following an intervention to devalue the Yuan. The stock market took a bashing as the implications for the economy are felt.... In an effort to send a crumb to beef producers, President Trump signed a bill authorizing increased exports of beef to the EU by negotiating for them to reduce tariffs until tonnage reached 35,000 MT in 7 years. The first year tariffs will be eliminated on 4000 MT from the current 13,500 limit to 17,500 MT. What was not released in the press release is the fact in return for this concession from the EU, the U.S. gave up its claims to financial penalties, awarded by the World Trade Organization, who had deemed the hormone ban to be improper and deserving of retaliabory financial penalties. The hormone ban will stay in place. Little American beef is currently exported to the EU [$150 million a year] and this news had no impact on the market. More important was the news from China that they will ban the purchase of American ag products effective immediately. Cattle Futures. Futures prices are overwhelmed by computerized trading. On days like Monday only a small percent of all trades are orders initiated by humans. The bulk are computer algorithms triggering buy/sell orders. A lower open because of the Chinese announcement of a trade ban on our ag products was reversed with a strong rally taking futures up a dollar only to settle back with small modest gains for the day."
Hmm, I missed this blurb yesterday and today, regarding the Tyson fire. "...It is too early to provide an accurate estimate of the downtime for the Garden City Tyson plant. That doesn't stop others from guessing and those guesses ranged from 2 weeks to 6 months. In the meantime, all of the beef in the plant including boxes and carcasses will be rendered and lost. The immediate result will be a spike to box prices which started yesterday continuing today. Deducting almost a week's slaughter of beef at a plant this size is no small potatoes and will incentivize every processor to make hay from this anomaly. You might see slaughter ratchet up in spite of everyone's claim of operating at full capacity. Filling in kill slots is much more complicated and will involve lots of evolving paths. Tyson will redirect slaughter needs for their established customer base to plants in Lexington and Dakota City. The shortfalls will be picked up by the competition to the extent their plants and labor forces are able to accommodate extra hours. The inefficiencies of extra freight and harm to carcass results will occur immediately but market impacts will be evolving and you can depend on the processors to take full advantage of their position. Day 2 of limit moves in live cattle will place a dark backdrop on the marketplace. Packer margins already outsized will widen to levels not experienced in modern times. Live prices last week were mostly $1 lower as packers waited for cattle owners to concede prices on lower bids. In the south most live trades were at $110. In the north, Iowa prices held near steady at $115-116 live. Nebraska sales were $112-113. For the week dressed sales were mainly $182-185 with the higher end of the range transacted earlier in the week. Excessive fed supplies caused by the plant disruption will move north. Texas will hold its own with current plants nearing a balance with supplies. Kansas operators will be seeking slaughter slots and those cattle will need to move north. Slaughter volumes will initially fall back to 625,000 head instead of the 650,000 head thought to keep the feedyards current and beef supplies able to fulfill consumer needs. The transition to a larger slaughter will occur over the coming weeks as smaller plants change the cow/fed cattle mix and larger plants attempt larger Saturday processing schedules. As if to test how much confusion those in the livestock markets can take, Trump's trade negotiators today announced a delay in the September 1 tariffs on $300 billion dollars of Chinese goods. The announcement followed a telephone call with the chief Chinese negotiator and U.S. representatives including the Secretary of the Treasury. This might be followed by a reciprocal move by the Chinese. Stay tuned. *Cattle Futures. Futures closed limit down for the second day in a row. Futures traded during the day but were hit by sell stops and panicky trader on the close. Futures always over-react but few people know when the price is overdone. Most cattle owners will suffer the price declines that on top of already red ink will take a lot of equity from the industry... TYSON GARDEN CITY PLANT CLOSED INDEFINITELY A large fire Friday night (Aug. 9, 2019) closed the Tyson Foods beef harvest facility near Garden City, Kansas. The beef plant processes 6000 head a day and will be closed indefinitely until Tyson can assess the damage. Sympathies go out to Tyson for the damage and fortunately, no one was injured and the plant was safely evacuated. The fire was a black swan event meaning no one included this type risk into their operating model. The implications to the beef market will be immediate. The Tyson plant is one of the largest in the country and is responsible for harvesting approximately 6-7% of the nation's fed cattle. It is unclear the nature of fire damage to the existing boxed beef inventory but cattle slaughter will be suspended immediately and re-routing those purchased cattle into other facilities will be a large task. Equally challenging will be harvesting current supplies of fed cattle in Kansas for the weeks ahead of us until the plant operating condition is restored. Current purchased cattle will find their way to other Tyson plants or special arrangements with competitor plants. All existing plants will move to extended processing schedules that are currently unknown. Future arrangements will be created "on the fly". All options will include extra freight and labor disruptions. Most plants are struggling with sufficient labor for their current plant requirements and adding hours will present new problems. The Garden City employees might be deployed to other harvest facilities but those arrangements take time. The market implications for those owning cattle will be negative. Packers already holding a strong hand in the control of the limited slaughter facilities will see their leverage increase. In the near term box prices might spike upward but it is doubtful cattle owners will be allowed to participate. Futures opened limit down in all contracts. The full implications will be impossible to predict until Tyson releases more information on the fire such as: 1) cause? [potential for arson?]; 2) extent of damage; and 3) timeline for reopening. Additionally it in incumbent on the live industry to work with all processors to present a plan for processing current supplies without disruption to either retailers, food service customers or consumers. " * I am assuming the prices went down because with the Tyson plant closing, the demand for the supply will be greatly diminished for a while.
Both August 12th and 13th limit down: https://www.cmegroup.com/apps/cmegr...tle_&type=p&exchangeCode=XCME&dataWidget=true
on 12 Aug, price gapped down to 103.75 and stayed there throughout the day. on 13 Aug, price gapped down again. Then there was some movement before suspended at 99.25 level. Those who have longed LE earlier might be weeping and gnashing their teeth.
and traders make money from - the bulls - the bears - the cows symbol LE - the pigs symbol HE .... (per maxinger)
A quicky update, as per the cow folks... TYSON GARDEN CITY PLANT UPDATE Tyson's Fresh Meats Division CEO Steve Stouffer met with media at the Garden City plant yesterday to inform the public and suppliers that Tyson is working as quickly as possible to restore major damage to its beef processing facility. He said it will be months rather than weeks before the plants is fully operational. While the structural damage is not a large area, the fire impacted major critical systems, including electrical that will be more difficult to repair. He said it appeared the fire was started by a welding torch. Tyson said the structural work can begin immediately but more time is required for the electrical repairs. Stouffer decline to offer a firm timeline and said Tyson is still getting more information on the damage and repairs. And @Turveyd does the following help you at all with your grain trades? "...The recent decline in corn prices leaves many feeding operations confused as to future grain options. Many had switched to wheat and now find corn pricing attractive once again. Corn is now sitting on life of contract lows and at levels not seen since well before the problems with this year's crop began. The corn basis is currently at 60 over the September board in Guymon, Oklahoma. Corn is now pricing into rations at $7.50 cwt. in the Oklahoma Panhandle..."
Damn I am wondering if this is the time to go long those winter LE futures. They are under $100 per unit... Grr. Lol, how many black swans do you ever get in cows?
Still no clear direction... ------ "The impacts of the loss of a major beef plant won't be gone this week but they will slowly diminish over the period of time before the plant is back up and running. Cattle owners will not be so panicky regarding the question of whether current supplies can find a home. Packers will want to hold on to record breaking margins but it is doubtful they can. All interested parties will look forward to more normalized price discovery. Packers finished Friday with what they could purchase in Nebraska and Iowa which wasn't many cattle. They purchased a few hundred cattle in Kansas at $107 on Saturday. Nebraska live prices were mainly at $106 while Iowa feeders received $107 but sellers in both areas reportedly passed even higher bids. Dressed prices were mostly at $172. Trade in the Texas and Kansas was at $105 -- $5 lower than last week. The week ended with the feeling that selling at the lower prices had been exhausted. The big news at week's end was the size of this week's slaughter at 651,000 head up 9,000 head from the previous week. Tyson pushed their alternative plants to their upward capacities to help accommodate their customer base. The other packers needed little encouragement, with margins between $300 & $400/head to push both daily volumes but also the Saturday volume. This type of situation is unheard of in the history of livestock markets -- a week in which box prices set record gains for the week and simultaneously packers are able to purchase fed cattle sharply lower. The national slaughter volume through Thursday was 13,000 under the previous week. Saturday's slaughter overcame that deficit by posting a 26,000 head increase over the previous Saturday leaving the weekly gain at 9,000 head. The only disappointment was the slaughter for the week fell under prior year but it was clearly a victory for the industry in spite of leaving cattle owners on the short side of the benefit. The prospective question is the sustainability of this slaughter level and even what slaughter level is necessary to stay current with fed supplies. The record margins at the beef plants are not sustainable and will likely cause cash prices to rise and box prices to fall in the weeks ahead. The industry will enter a trial and error period of tweaking the system with daily and weekly adjustments. Readjustments to cattle flows will occur and be driven by logic and seat of the pants reactions to changing circumstances. Opportunism will reign supreme. For example, Canadian cattle feeders were unwilling to take lower prices offered by Canadian packers. Some of the Canadian feedlot cattle move into the U.S. and are slaughtered at Agi-beef, JBS and Tyson plants in the northwest. If this flow is interrupted then Canadian packers will need to ramp up slaughter volumes domestically to accommodate these cattle. In the big picture, this probably does not impact overall beef supplies but does change where cattle are processed. Smaller independent processors will ramp up in this country and may substitute fed cattle for cows in some plants. It is safe to say price volatility will moderate in the coming weeks as supply and demand seek a sustainable level of production and prices resume a more normalized trade pattern. All of the attention is currently on testing the system to accommodate current supplies of cattle in existing slaughter facilities. It now seems apparent that we have the slaughter capacity for the current supplies of cattle. The next focus will be beef demand. Returning normalization to the beef flows is critical to holding on to the demand side and the beef customers. The loss of the beef products from the 30,000 head in the Tyson plant is a big deal as the surge in box prices confirmed this past week. The restocking of beef inventories resulting in lost sales will carry over for a couple of weeks. Each retailer or food service company failing to receive beef deliveries will face decisions about alternative plans. The choices will vary from reorder to switch meat promotions not always following logical patterns, but frequently done on the fly like many of the adjustments made from disruptions caused by this event..."
Bullish IMO. Last week's slaughter was UP despite the plant shut-down? At some point I think the 30-50% hog loss in China will trickle into increased prices for the meats. China's freezers & other suppliers to china will start running dry at some point. Eventually more exports for U.S. beef/pork.