By Cassie Fish, http://cassandrafish.com

A last minute deal that averted a government shutdown for now has provided fuel for a rally in CME cattle futures. Futures had a rotten close Friday, spot October LC posting a key reversal after eeking out a contract high. The rest of the complex closed lower on the week. Today’s rally has done nothing to alter the bearish cast of last week’s market action.  

There is fundamental fuel as well for the bearish tone, as boxed beef values struggle mightily to find their seasonal low. With boxes closing lower on the week and near their support level since May, it appears consumers are picking up items other than beef while shopping. Production is down sharply but less supply and record high retail beef prices is hurting clearance of what beef does need to move.

Last week’s 612k head slaughter was a surprise to many as packers took hours on Friday. Fed cattle supplies are tight but with beef not moving well, cutting harvest is the easy choice to preserve margins that are sagging red. Talk for this week’s slaughter is 615k to 620k head.

Thanks to the cuts, boxes printed higher this morning, up $2.15 at $302.93. But it is cautionary that big kill cuts are needed again and again to short up wholesale beef prices.

Packers purchased 74k head last week in the national negotiated fed cattle trade, 15k head with time. That was likely enough since it comes on the heels of 87k head volume and packers can also pull on October contracts. Last week’s 5-area average was $183.64, down $1.09 from the prior week. Expectations for this week’s cash trade are generally steady.

It’s a push-pull beginning to Q4. Not all bad, but not all good either.  All prices are at record levels for any October.

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