By Cassie Fish, http://cassandrafish.com
Active packer competition for a more current offering of front-end, market-ready cattle resulted in sharply higher cash prices last Friday. Prices were widely $4-5 higher and traded as much as $7 higher than the prior week. All packers were in the market, once again affirming the impact of market competition on price.
CME cattle futures answered Friday’s higher cash market by opening sharply higher this morning, vaulting above the 40-day moving average and topping the 100-day MVA for a while before retreating. Still, the basis has widened again, Jun LC $7.50 behind the top price paid Friday of $130.
The market is hitting on all cylinders right now. Big kills have finally made a dent on cleaning up the front-end and weights, which are finally declining too, could dip below year ago levels by June 1. There is widespread discussions front supplies will stay tight until July.
Boxed beef prices are expected to be sharply higher this week, gaining $10 quickly. This week’s kill is already rumored that a few hours could be pulled after another 590k kill last week. Just the last two weeks the industry has killed 50k more cattle than a year ago.
Cash this week is already expected to be higher, possibly reaching the $132-133 level left behind one month ago.
Jun LC continues to gain on the deferreds as the bearishness of bigger numbers focuses on Q3, Q4 and beyond while the next 60 days look much less negative than even days ago. Right now anyway, the arguments about Jun LC being July 4th cash equivalent aren’t audible.
Instead, the retail beef features are expected to be widespread and competitive from now until Father’s Day weekend. If product clears briskly to the consumer and kills stay above 580k, the bleak 2016 outlook portended by futures may indeed prove to have been overdone. Proof that doing enough things right for long enough has altered what appeared to be a dismal fate to a better-than-expected reality.