Strong

By Cassie Fish, http://cassandrafish.com

 

Yesterday’s USDA Cattle Inventory report confirmed a friendly supply outlook but was as anticipated. Yet the report has supported CME feeder cattle futures and back month live cattle futures most of the day. Certainly managed funds have plenty of room to add to longs and reduce shorts, as that number was at a low just two weeks ago.

But it’s the news of $178 bids in Kansas by three packers in the last hour or so that have kicked CME cattle futures fully into gear. Most active April LC has not made a new high for the move but the rest of the contracts have. Yes the market is still overbought but it had a solid short term correction this week, setting it up for today’s surge. In the north, $280 dressed has been paid. That last time cash traded over $178 live was the first week of November 2023, when it averaged $179.91/cwt.

It’s pretty obvious that that one week of active negotiated fed cattle trade volume of 83k head last week was inadequate to get packers in a strong inventory position. Packers must have enough inventory around them or they don’t have leverage and that is true this week.

The dramatic decline in carcass weights the past two weeks because of the severe winter weather is supportive. Today the USDA reported steer carcass weights down 9 pounds from the prior week at 918 pounds, 3 pounds above a year ago and 6 pounds above the 5-year average.

Boxed beef values are declining seasonally and that is expected to continue, pushing packer margins further into the red. The further in the red they go, the more adjustments they will make on weekly slaughter. This week is estimated at 630k head, which would be up 12k head from the prior week. Daily throughput has been solid this week.

 

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