By Cassie Fish, http://cassandrafish.com
Today’s quietly lower action is consistent with the last few weeks as the market continues tracking this well-worn trading range. Even lower on the day, Oct LC is maintaining its premium to last week’s cash as liquidation out of Oct LC continues at an active pace. Tomorrow Oct LC will be less than Dec LC.
New news is scarce. Packers think cash will be steady this week and with boxes slipping seasonally, will do their best to preserve their substantial margin. Showlists were mostly down and packers will continue to haul cattle to fill holes where it suits them.
Last week’s USDA Comprehensive Boxed Beef report volume dropped sharply from the prior week’s all-time record high. Prices averaged $3 lower last week (though $17 higher than last year) and weakness is expected to continue into next week. The trim and grind complex is especially under pressure. Still, when adding the two together, movement to end users continues to be solid. The choice and select rib especially are holding up remarkably well, way above the 5-year average, let alone a year ago- making 2018 the year of the rib. It will be interesting to see what lies in store for the Q4 rib rally.
There is some concern that movement of product to the east coast will be disrupted by Hurricane Florence, but traders know there will be a post-storm reload as well.
So, it’s another week of the industry working through the remaining ample supplies of September. A regional packer bid of $168 dressed has been noted in the north. Trade will likely take place late this week.
Futures seem comfortable with $108 to $111 price range up front as well as carrying a seasonal premium in the deferreds. Neither significant downside, or upside potential is in play for now.
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