Solid Ground

By Cassie Fish, http://cassandrafish.com

The USDA just released the actual slaughter weights and head count for the week ended October 23 and actual steer carcass weights dropped 4 pounds to 918 pounds from the prior week, down 11 pounds from the prior year. Though it is only one week’s data, it is a strong indication that the supply of market-ready fed cattle is indeed, getting more current. This gives the rally in cash prices this week additional credibility and portends staying power. The fed cattle market, for the first time in ages, is finally on solid footing.

The fed slaughter that same week was 514k head which was 77.6% of the total as cow slaughter remains elevated.

This week, packers have paid up for live inventory but the volume traded thus far, only 32k head, indicates their desire to pay up further this week. Currently feeders and packers are at a standoff with packers bidding steady with this week’s higher level though unwilling so far, to extend bids. Bids are $202 dress and $128 live at this writing.

Boxed beef prices are grinding higher this time rather than in a runaway higher as was the case in August. The choice cutout is about $9 off of the recent low. Packers are likely aware their enormous margins are finally going to correct, but they will do whatever they can to ‘manage’ that contraction.

One avenue not at their disposal is to limit the rise in fed cattle values by cutting kills since most plants have been unable to resume post-covid throughput. End users around the globe are impatient to receive product so cutting kills and shorting orders, when margins are still record wide, would be foolish the final two months of 2021.

CME cattle futures are red today on a short-term correction but overall, futures look bullish technically and additional upside is likely, though the leadership will come from the physical side of the market.

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