By Cassie Fish, http://cassandrafish.com
Cattle traders, feeders and packers are all waiting to see where this week’s negotiated fed cattle market trades. Cattle feeders are generally priced at $160 and packers are hoping if they wait long enough, prices are no higher than $158. Some even think they can pull off steady trade, though given the small number of cattle purchased last week, that seems unlikely.
The sharply higher boxed beef market (choice is almost $15 higher than a week ago) begs for hours to be added so there is product available to sell at the higher values. So far this week slaughter levels have been hefty. Packers must buy cattle to cover slaughter, its just that simple. Sure, a new month will bring access to January forward contracts that can be relied upon, but higher cash fed cattle prices are highly likely for this week and all of 2023 when compared to 2022.
The decline in 2023 fed cattle supplies when compared to 2022 will be sorely felt by the packing industry and end users will be forced to adjust to about 5% less supply, just as they come off two consecutive years of record U.S. beef production. The supply contraction will be even more significant in the second half of 2022. It is expected to be fourth biggest year over year drop in beef production since 1979.
CME live cattle futures today are putting in a pretty robust performance with December and February up about one dollar, posting life-of-contract highs once again. Futures are discount to the asking price of $160 but are portending cash could trade $2 higher than last week’s price, etching out a new cash high for 2023 and the highest cash price for any December since 2015. In the last week of 2015, cash averaged $161.95 to only trade even higher in early 2016.
Choice boxed beef prices are hanging near $280 again today and it appears likely that this last week in December will end at a record high choice cutout price for the last week of the year. In late 2015, the choice cutout was just under $243 and one year ago, it was $265.
Happy New Year to all of our faithful readers and thank you!
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