Live Cattle Futures Look Beefier and Beefier by the Day
Here's why prices are going hog wild - and why you might be dining on veggie burgers for a while.
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If you haven't gone to the supermarket yet, be ready for a shock when you get those hamburgers and steaks you plan on grilling this Fourth of July holiday. Forget the higher prices for all the condiments and your favorite beer. The price of lean ground beef and angus steaks will knock your socks off and make you think about trimming your guest list.
Let's look at a few charts.
In this daily bar chart of the continuous live cattle futures contract, below, I can see that prices have moved sideways the past 12 months in a large rising or bullish triangle formation. The top of the triangle is the 190 cent area, with higher-lows in December, April and June. Prices trade above the rising 50-day moving average line and above the slowly firming 200-day line. The trading volume has remained steady and the daily On-Balance-Volume (OBV) line has chopped higher. The Moving Average Convergence Divergence (MACD) oscillator is above the zero-line.
In this weekly Japanese candlestick chart of the continuous live cattle futures contract, below, it is easier to see the bullish or rising or ascending-triangle formation noted above.
Prices trade above the rising 40-week moving average line. The weekly OBV line shows a positive trend the past three years. The MACD oscillator just crossed to the upside for a fresh outright-buy signal. The height of this triangle projected upward suggests a price target of $2.20/lb. or higher.
In this monthly Japanese candlestick chart of the continuous live cattle futures, below, I can see that prices have risen the past four years and have broken above the highs set back in 2014. This is not a supply chain issue.
What is going on? Ranchers have been pushed to sell cattle because of severe drought conditions and the rising cost of feed and supplies to support their herds until they reach market weight. There are now fewer female cattle available for breeding, which means it will take time to rebuild the cattle population. This is a problem that will take time to fix.
Bottom line strategy: It is time to think about veggie burgers and turkey burgers.
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