Posted On: 06/29/2017
By Cassie Fish, http://cassandrafish.com
The negotiated cash trade has gotten rolling this morning at $118-119, though some are passing for $120 in the south. There may have been some scattered $120 in the north. This is lower than last week’s $121.50 average, but futures seem to like the lower money.
Most active Aug LC has chipped away at basis this week consistently. There’s been a lot of conversation as to why this is and little clarity. Suffice it to say if the cattle market is going to continue to trend lower in Q3, it appears it will be a cash led decline. Just as 
the mega discounts held by futures much of 2017 unsuccessfully portended lower prices (but did inspire aggressive selling of fed cattle) will the opposite be true the second half of the year? On today’s high, Aug LC Is a mere $2.50 discount to the 5k head $119 trade in Kansas that has occurred today and it’s bolstering feeders to pass $119 as well.
Boxes are printing lower with a vengeance and a bottom is far off. It’s only June and boxes normally won’t catch their breath until mid-July at earliest. Actual slaughter stats were just released and the industry posted its biggest fed kill since July 2013- 514,802 head for the week ended June 17, so there is meat in the pipe to sell. Boxed beef salespeople are complaining of lousy, spotty interest post-4th and will have to lower price lists to avoid a backlog.
Carcass weights are coming up quickly, today’s steer carcass of 855 pounds are only 12 pounds below a year ago, up 8 pounds from last week.
CME cattle futures have been a choppy, swingy affair all week and it’s clear the market likes this range. On the spot chart, $113.97-114.65 is a key support area and is close to the $113.40 area in Aug LC. Perhaps it will take it out if and when fed cattle prices take out this $118-120 support. In the meantime, some early roll out of the Aug and into the Oct has been noted.
How ugly it gets, or doesn’t get in July will be significantly dictated by what it takes to find beef demand again. The dog days of summer aren’t known for a big reload and with beef production plenty big and plenty of cattle around in the coming months, demand is the key requirement. That’s what created a much-better-than-anyone-expected market in 2017 and its importance cannot be under estimated.
