** AgResource Daily Cattle Analysis: Cattle futures started the week with good gains, and a firm outlook is offered for early trade this morning. Last week’s low in April cattle near the 100 day moving average held through early trade on Monday, and technical buying had both April and June more than $1 higher at the close.
Beef cutout values started the week strong and were up $1.72 on choice, and $1.23 on select on moderate demand and offerings. The spread between the 2 quality grades remains narrow, at just over a $4 choice premium on light seasonal demand for higher quality beef. Overall, the choice cutout is priced about where it was at the start of the year as neither rallies or breaks have been able to get much traction. The chart presents the dilemma that the cattle/beef markets are currently struggling with. On one hand there is a very strong seasonal tendency for the beef market to forge longer term lows this week, and then strengthen well into the 2nd quarter. On the other hand, 2nd quarter beef production is expected to increase by a record amount (12%) year over year, to a record large amount (7.2 Bil Lbs). Hedgers should be ready to make 2nd quarter sales on rallies back to $120 or better.
** South American Weather Pattern Discussion: The EU and GFS weather models are in fair agreement. Our confidence in the forecast remains relatively high.
Dry and warm weather occurred across Argentina overnight with Monday’s high temps ranging from the 80’s to the lower 90’s. Showers persisted across N Brazil and Parana with totals of .4-1.50”. Temps were seasonal.
The Argentine weather forecast is warm/dry for the next 10-14 days. We really don’t see a meaningful chance of rain for the next 2 weeks with heat to return during the last half of the week. Virtually no rain is expected through the weekend with a few lite and widely scattered showers due early next week. Rainfall totals are estimated to range from .1-.7” on coverage of 50-60% of the Argentine crop area which is far too lite to stabilize crops. ARC notes that the long range weekly EU weather model offers at least another 3 weeks of dryness with above normal temps for Argentina – very concerning for crops.
The Brazilian forecast is drier across northeastern crop areas which will aid harvest and the early winter corn planting pace. Seasonal temps are expected with highs in the 80s/low 90s.
** EU Model 10 day Rainfall Forecast:
