Northern Bids Strengthen; Futures Chop; Cutout Flattens

By Cassie Fish,

It’s midday, midweek of the final days of 2022. Boxed beef values, boosted big time by harvest cuts, flattened today at the highest level since Q1 2022. Very few bids have been circulated by packers, loathe to pay up to secure cattle inventory, though two packers in the north bid $255/cwt dressed, which at a 63.5% yield equals $158.75 FOB. That would be a new high for cash if the bulk of cattle trade there. This week’s big question is will packers be forced to pay up a lot or a little in order to secure inventory to fill post-holiday slaughter? Choice boxes at $280/cwt certainly gives the packer, restored to a positive margin, some room to pay up without giving up all of their improved margin.

Nebraska is very current as evident by their grading data, which still shows choice + prime below the 5 year average, while the national choice + prime average surges to an all time high.  More fed cattle are harvested in Nebraska than any other state.

 The remaining take away here is that Kansas and Texas grading must be exceeding year ago levels and at an all-time high and indeed that is correct.

So far this week, the industry has posted two 128k head daily harvests and some companies have added Saturday. In fact, Tuesday’s fed slaughter was 101k head, which is excellent and at the top end of throughput.

CME live cattle futures spent another day in a quiet, choppy, two-sided trade. Soon-to-expire December rallied to another new all time high today, reaching $157.50, the highest a spot cattle contract has traded since April 2015. The December/February spread made a new high today also, narrowing in to 35 cents, a bullish signal.

The 2023 CME live cattle contracts continue to ignore extremely bullish data and are carrying only modest price premiums to current cash prices.

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