February cattle futures plunged to a new contract low this week. The selling pressure stemmed from renewed weakness in the beef market as well as lower cash trade. After a brief uptick early this week, beef prices eased again. While the setback was fairly modest, it seemed to spark another round of technical selling. Also, cash fed cattle began trading on Thursday with prices in Texas and Kansas down $2/cwt from the previous week to $125. With the sharp decline in December futures, cash and futures are converging near the 125.00 level.
The volatile price action in cattle futures continues. The February contract fell through short-term chart support near 131.00, which triggered fairly aggressive technically-based selling carrying the February contact to a new low near 127.35.
Even though the beef market sputtered a bit this week, we expect wholesale prices to find good buying interest at these levels and for prices to firm into early 2016. If so, it should provide underlying support to both cash and futures prices. In addition, this week’s sharp pullback in the dollar may also stimulate export interest. Look for cattle futures and cash prices to establish a low soon and turn higher into 2016.