By Cassie Fish,

Early strength in CME cattle futures and bullish cattle feeders had many expecting negotiated fed cattle will trade higher than last week, some thinking a couple of bucks higher. At the same time, big slaughter schedule cuts this week, with more slated for next week, cast a more limiting, if not bearish, light on the market outlook. This week’s slaughter will be sub-600k head and next week’s slaughter will likely be as well as news another major packer will reduce hours to 32s at all plants.

It’s true, Q1 fed cattle supplies are the apex of tightness for this cattle cycle, at least until Q4 and packers know how to survive by minimizing losses. Beef demand isn’t that great anyway in February and March, which is true even when retail prices aren’t record high and supplies are plentiful instead of tight. Retailers will leave prices high, makes sure the meat counters have some inventory, but that sums it up.

Wholesale beef is sold in the 21-day spot window every day, so as production cuts mount, less product is available. This morning’s boxed beef price rose $1.39, very likely because of supply reductions, not demand.

Most active April LC has sold off 272 point from its high today at one point showing a triple digit loss. The April LC chart depicts a sweeping, new high for the move, outside day with a potential lower close. April has pulled back to its 10-day moving average. Right now, April is lower on the week, a potential classic, weekly hook down. The weekly stochastics have recovered dramatically since bottoming around December 1 and are now near 90%. Friday’ CFTC Commitment of Traders’ report will probably show an increase in managed fund longs and commercial shorts.

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