By Cassie Fish, http://cassandrafish.com
USDA just reported this morning that the week ending August 18, the fed kill reached 526k head, the largest fed slaughter since the week ending June 23. Although last week’s fed kill was probably only 505k, this week ought to reach 515k to 518k head, as packers ramp up production to meet excellent demand and bank record profits.
This slaughter level is both necessary and constructive- necessary for the industry to retain front-end currentness in the midst of large supplies of market ready cattle, almost always challenging as the calendar turns to fall. September fed slaughter this year should mirror last year’s level and that ought to be adequate to finish up these many months of big front-end supplies.
Of course, there are lots of cattle on feed, but plenty had placement weights under 600 pounds over the summer meaning cattle are spread out over the October-April period- not bunched. Q4 supplies will be similar to last year. Although 2018 beef demand thus far, has exceeded last year- the cutout is currently $20 higher than a year ago.
Carcass weight data was also released today and steer carcass weights rose 5 pounds from the prior week to 886 pounds. Weights typically rise very rapidly in August. Weights now stand 2 pounds above 2017. Following today’s weight data release, talk surfaced that weights are rising very dramatically and that bearish news will post next week and the week after.
CME Cattle Futures Stay Green
So why do futures act strong? Perhaps the bad news is in the market. Almost 10k fed cattle have already traded at lower prices this week, $106-108, mostly in Iowa. Dressed bids are $168 to $170. Packers are dug in on buying cattle lower and seem to be willing to burn inventory if needed to get it done. But will that force the packer to pay up next week? It appears the remaining cash trade may not occur until tomorrow afternoon, ahead of the 3-day weekend. A weekend that is full of great beef features in grocery stores, by the way.
This week’s basis change has been subtle, occurring without fanfare. Technically, the open increase accompanying yesterday’s rally was positive. The market seems comfortable trading higher on the week. Oh, and last year, futures bottomed this week for all of 2017.