A Bit Better

By Cassie Fish, http://cassandrafish.com

Yesterday’s F.I. cattle slaughter was 122k head, the best Monday in a long time and expectation for a 660k to 670k head slaughter this week, on the heels of last week’s 661k are translating to optimism. The sluggish hourly fed cattle slaughter rate has been this market’s nemesis ever since Covid-19 struck and disappointingly, plants have struggled more in 2021 than they did in late 2020.

If the fed cattle beef processing industry can consistently improve hourly slaughter rates, then the cattle feeding industry would have the opportunity to finally get fully cleaned up on the front-end which equals leverage and higher cash fed cattle prices. There is no other fundamental factor of greater importance than this single issue.

In 2020, there were some big kills in November and December – ranging from 655k to 669k, with three over 660k. If the industry can duplicate that effort and knock out some +660k beforehand, then upside potential for cash fed cattle prices is real.

Today’s negotiated fed cattle trade has gotten underway with prices as low as $124 on the south plains to as high as $129 delivered in the north. The market has a stronger feel and gains of another 0.50 to maybe a buck are possible this week as the cash cattle market continue to slowly claw back value.

Boxed beef values are grinding higher as expected, the rib leading the charge up over $20 from a week ago as of yesterday afternoon. Last week saw a nice pick up in boxed beef sales volume, including a pop in export sales. Packer margins last week averaged, net, north of $700 per head, another record for early October and contributing to what will be a record year of profitability for the beef packing industry.

CME cattle futures have responded to the better news with a solid two digit up day. The futures market continues to trade in the same trading range it has been in for weeks on light volume and insignificant changes in open interest.

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