Weekly commodity wrap-up

Case of the Mondays hits cattle

February live cattle futures were limit down (-$6.75/hwt) on Monday closing at $180.975/hwt. This move was a reaction to a bearish Cattle on Feed report the previous Friday afternoon that surprised analysts and traders with placements shown to be 106% of last year’s placements for the month of September putting the total head on feed at 11.6 million head, the second highest inventory for the month of October going back to 1996 when the series began.

The high placement figure left analyst scratching their heads as the cattle herd has been contracting for the past two years due to extreme weather and drought. According to the numbers there is still liquidation taking place as heifers and heifer calves accounted for 4.64 million head, up 1% from last year.

It is both possible and logical to come away from this week’s action with two different views. Prior to last week, the cattle market had been in a clear up trend for two years or more with well-defined trend lines where dips have been bought by bullish traders. After this week, the trend has clearly shifted in the short term to the downside and the mindset will shift for some with the idea that rallies should now be sold even though heifer retention numbers would indicate total herd supplies have not yet crossed over from contracting to increasing.

Stock indices lower

Stock indices were all lower this week with tech stocks leading the charge. The Nasdaq was down 3.5% at one point during the week and is now down more then 10% from its highs of the year with the Dow and S&P in similar shape.

Crude oil sinks

Crude oil futures were also lower on the week despite continued concerns about conflict in the middle east spreading beyond Israel’s borders. December WTI Crude oil futures were 5% lower on the week Friday morning reaching $83.50 per barrel.

The path forward for markets is never known but a clear fork in the road has appeared in the past two weeks and investors that typically follow the well-worn path might be considering the road less traveled by and that could make all the difference.

Have a comment or question? Please reach out to derrick.hermesch@pinion.global.com

Opinions are solely the writer’s. Derrick Hermesch is a commodity futures broker with Pinion. He can be reached at 785-338-9605. This is not a solicitation of any order to buy or sell nor does it provide any recommendations in regard to the market. Information contained herein is believed to be reliable but cannot be guaranteed as to its accuracy or completeness. Past performance is no guarantee of future results or profitability. Futures and options trading involve substantial risk of loss and is not suitable for all investors.