Pull Back

By Cassie Fish, http://cassandrafish.com

CME live cattle futures have spent most of the day lower, taking a breather after a stunningly positive performance last week. The market is in ‘pre-Goldman roll’ mode so most active August is losing to the rest of the strip. The long term trend continues higher for the cattle market, with spot June LC expiring record high Friday for any spot live cattle contract.

Packers are struggling to buy many cattle cheaper and as a result, and despite +$100 per head margins, last week’s slaughter was light at 644k head. Saturday harvest was only 19k head and it is unclear how today’s slaughter will fare. Tomorrow plants will be dark.

As of Friday afternoon according to USDA, packers had purchased only 44k head in the negotiated market, the lowest of the year and one of the lowest on record. Even with this week being a short week and the packers’ access to July forward contracted cattle, their inventory is severely tapped. It seems clear based on last week’s small slaughter that packers will continue to demonstrate consistent discipline restricting throughput to attempt to manage cattle costs. This week’s negotiated cash cattle market has a good shot to trade higher. There will be a lot of business to get done in just three days this week.

Boxed beef values seasonally are declining and that is expected to continue most of July. Still so far, the market’s losses have been mild considering prices are still record high of any early July in history.

Here’s wishing all of our U.S. readers a Happy 4th! See you Wednesday.

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