Correction Day Three

By Cassie Fish,

Most active April LC has been backing and filling for three days since scoring a new life-of-contract high Monday. Certainly technically overbought, it makes total sense the market is retracing, 175 points off of Monday’s high to today’s low. February continues stout and undeterred, trading near its contract high.

The fundamentals continue bullish. Today’s carcass weight data released by the USDA showed steer carcasses dropping another 2 pounds from last week to 908 pounds. This is down 22 pounds from a year ago and is only 5 pounds above the 5-year average. The last time weights were this low was pre-pandemic. And given the harsh nature of this winter in the north, there is a decent chance carcass weights could fall below the 5-year average before bottoming in late May. 

Last year the annual average for steer carcasses was 913 pounds. The 5-year annual average was 896 pounds. This illustrates just how massive carcass weights have increased since 2019.

Boxed beef values are staging a strong mid-February rally, stronger than the seasonal. Today choice boxes gained $3.86 pushing to $279.53. Both the rib and chuck primals are up over $10/cwt from a week ago and the round is up nearly $8/cwt. The choice cutout is up almost $30/cwt from the bottom carved out in mid-December.

Just the last two weeks, F.I. slaughter has fallen short of a year ago 70k head. This week will likely be 20k below a year ago. There is less beef to fill orders, just like there are less market-ready fed cattle to harvest. Luckily for the packer, the rally in boxed beef values this week may be enough to offset last week’s higher cattle costs and keep them black. Both the packer and the feeder owe strong beef demand for that.

Many still think cash cattle prices in the south will be higher this week. Parts of the north are getting pounded with snow again and cold weather has pushed in pretty much everywhere in cattle feeding country.

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