Quiet Chop

By Cassie Fish, http://cassandrafish.com

There’s not much happening today, futures or cash market. CME cattle futures are happy to chop in a tight range near yesterday’s settlement. In the south a few traded at $95 but most cattle feeders are pricing cattle a lot higher than last week and would not consider selling at steady. In the north, a regional packer picked up a few offered at $157, steady with last week too.

Psychology varies from feeder to feeder depending on the individual situation. There are an estimated 829k head of cattle that would have been slaughtered by now that have not been because of the disruption in packing plant production. There are reports that some yards are in better shape than they were. Others are still digging out. Many are pushing the marketing window on everything on feed or grass out as far as can be done. After all, futures reflect expectations higher prices are coming.

Boxed beef prices mid-morning printed down and more erosion is expected this week. Packers are taking a measured approach as they are fully aware of two key facts. One, that beef demand is suffering due to record high retail prices and cheaper alternatives and two, they can slaughter fewer cattle than a year ago and still yield greater tonnage because carcass weights are record high by 36 pounds in the most recent USDA data.

The rally in futures and resulting basis move may have helped cash cattle prices find a bottom, but the question is how much upside potential exists for fed cattle prices at this time? With boxes struggling packers will attempt to manage their throughput and margin carefully. Packer margin last week was its narrowest since mid-April and will likely lose ground again this week.

This scenario may play out over a many weeks as the dog days of summer roll by while in the background the unprecedented COVID-19 related economic disruptions continue and the long-term implications of these issues remain unclear.

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