By Cassie Fish, http://cassandrafish.com 

CME cattle futures continue to pull back and stay red today, unwilling or unable to continue to surge higher, despite their discount to the average cash fed cattle price over $192/cwt. Perhaps its tomorrow’s mid-week holiday break, or perhaps it’s the calendar which portends seasonally weaker boxed beef values. Maybe it’s speculation that cash fed cattle prices too are toppy? Whatever the reasons, bulls are being forced to be patient after being rewarded with Friday’s big rally as futures hit pause.

And then there’s Friday’s USDA Cattle-on-Feed report, which is expected to show cattle-on-feed and placements below a year ago while marketings are expected to be even with a year ago. Total COF for June 1 will likely be just under 2018 levels, but above 2017—and far above the low COF levels seen in 2014-2016. The report is expected to confirm a record number of cattle on feed with 120 days or more. Cattle feeders are being rewarded for adding days on feed and slowing the marketing pace by capturing higher prices when selling. The cattle feeding industry is creating more big and heavy cattle with no penalty. One bonus from this is a record number of prime grading cattle.

 

Packer margins remain under pressure even though boxed beef prices sit at their 2024 high of $320.96/cwt this morning. The choice/select spread is narrow for mid-June at $14.78, thanks to continued strength in the lean complex, which is trading at record highs. For those that don’t recall, 2014 and a chunk of 2015 saw record high beef 90s too.

The industry finds itself in interesting and unprecedented times as the charts above make clear. The same factors spelled out above that have helped the market rally can also become the market’s nemesis.

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