** AgResource Daily Cattle Analysis: Cattle futures closed lower on Monday and a steady outlook is offered for early trade at the start of the New Year. Dec cattle rallied into expiration and settled at $124.80 versus $123 a year ago. It’s the start of 2019r, but many traders are not expected to return until next week, which could keep trading volumes reduced.
Cash markets went untraded on Monday while beef cutouts were firm. The choice cutout valued gained $.94 and select jumped $3.14 on good demand and moderate offerings. The chart plots year-end closing beef quotes, and both markets end 2018 at the best levels in 4 years. The choice/select spread at $4.69 is now more than $12 under the high traded in early November. It’s also the lowest year-end closing quote for the spread on record.
Initial support this week in Feb cattle is expected at $123, while rallies back to new contract highs should be used for sales. We see 2nd quarter cattle futures (Apr/Jun) as overvalued.
** South American Weather Pattern Discussion: The EU and GFS forecasts are in good agreement and much drier for the central half of Brazil than what was offered Monday. Rain forecasts have underperforming for 3 weeks and amid the drier forecast going forward, we are hoisting the yellow flag of concern for dryness in Central Brazil and the excessive rains for the northern 1/3 of Argentina. ARC is concerned with South American weather in the New Year!
The EU model’s 10-day rainfall forecast is attached. Notice that rain totals have been much reduced for Central Brazil, while the prospect for heavy and flooding rains persists for the northern 1/3 of Argentina. This pattern has been stuck for the past 2 weeks and shows no signs of changing into mid-January. A high-pressure Ridge is farther west and looks to stay anchored across NC Brazil.
Cumulative rain totals of .50-1.00” are expected for S Mato Grosso, Goias, MGDS and Sao Paulo. Near normal rain is expected across RGDS and Santa Caterina, while 4.50-9.00” of rain fall across NC Argentina. This area has already been besieged with too much rain and flooding is likely in the low-lying areas. Temps average below normal in Argentina but above normal in NC Brazil with 90’s.