Cattle Takes a Breather
Geoffrey A. Smith
At the beginning of August I wrote about the possible rise in live cattle. Cattle had risen above 121.00 and was currently trading around 125.00 with the expectation of heading to the 131.00 area as long as it stayed above 121.00. Since that time, live cattle went to 127.20 and has backed up to 123.85.
Two things have pulled back the price of cattle; the cattle on feed report, and the crop production report. Cows take feed from crops, and hay of course. The crop production report came in better than expected on corn. Though it was down, it was not down as much as expected. In other words, there is more corn than thought. This coupled with the cattle on feed report that showed an increase of cattle in the feed yards. So supply increased in cattle and there is more corn to feed them with than expected.
Below is a daily chart of live cattle with a 3, 21, and 65 day simple moving average. Notice how the 3 day has crossed below the 21 day average. This puts live cattle in a short term down trend. However, live cattle is holding above the 65 day average which is at 123.60. If cattle can close back above 125.20, it should go back to challenge the high at 127.20. Below 123.60, it should drop back to 121.50.
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