Box Beef Break Compresses Margins; Increases Buying

The USDA’s Comprehensive Boxed Beef cutout has declined three consecutive weeks after making a new high for any June. This price decline coupled with fed cattle prices that have been trading more sideways in comparison has compressed packer margins to likely a breakeven to red for the industry, depending on each plant’s costs.

That’s why the response to run only a 32 hour work week at two plants this week has occurred. This cutback in throughput has put a bottom in boxed beef prices this week. But there were clear signs last week that end user interest was stimulated by the decline in prices. Estimates for this week’s slaughter are in the 620s.

The daily cutout printed higher yesterday afternoon and this morning as the wholesale beef market finds a seasonal bottom this week, a little early. This is good news for packers.

It will be challenging, even with cutting slaughter, to break cash fed cattle prices. Last week’s purchased volume of 64k head included 21k head with time but the overall number is historically small.

CME live cattle futures made their lows in the first several minutes of trading this morning and have since staged a brisk rally. The short term technical indicators are overbought and the market is just hanging out 100 to 120 points above today’s low. With August and October LC discount to cash and the likelihood that cash will be stronger again this week, especially in the north, the downside in futures prices limited.

Copyright © 2023 the Beef Read. All rights reserved

The Beef is published by Consolidated Beef Producers

Use of part or all of this blog for any reason without permission is strictly prohibited.  

Disclaimer:  The Beef, CBP, Cassie Fish nor NFC Frontier Capital Markets shall not be liable for decisions or actions taken based on the data/information/opinions. 

This material has been prepared by a sales or trading employee or agent of New Frontier Capital Markets and is, or is in the nature of, a solicitation. This material is not a research report prepared by New Frontier Capital Markets. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. DISTRIBUTION IN SOME JURISDICTIONS MAY BE PROHIBITED OR RESTRICTED BY LAW.  PERSONS IN POSSESSION OF THIS COMMUNICATION INDIRECTLY SHOULD INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH PROHIBITION OR RESTRICTIONS.  TO THE EXTENT THAT YOU HAVE RECEIVED THIS COMMUNICATION INDIRECTLY AND SOLICITATIONS ARE PROHIBITED IN YOUR JURISDICTION WITHOUT REGISTRATION, THE MARKET COMMENTARY IN THIS COMMUNICATION SHOULD NOT BE CONSIDERED A SOLICITATION. The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that New Frontier Capital Markets believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.


Please follow and like us: