Trying

By Cassie Fish, http://cassandrafish.com 

CME cattle futures have followed through to the upside this morning, making a new high for May but still trading under the April high. Futures are now edging into overbought technical territory. Open interest has increased the past two days giving this rally more credence. The easiest way to describe the action is that the market is back to the top of its trading range of the last 7 weeks.

Boxed beef prices continue to soar ahead of Memorial Day thanks to packer production cuts. Today the choice made a new high for the move, up $2.74 at $309.51 while the spread narrowed in just a touch to $12.11 thanks to a stronger select cutout today. The middles, especially the rib, are the leaders on this rally as end users scramble to make sure they have steaks on hand for the old-fashioned fire-up-the-grill holiday coming up May 27.

The negotiated fed cattle market has traded 3k head week-to-date, yesterday’s 432 live steers that sold averaged $186.39. There has been no trade in the major cattle feeding areas as cattle feeders are pricing cattle higher than last week, bolstered both strong futures and strong wholesale beef market values.

Packers are experiencing the biggest margin squeeze of the cycle right now. One of the reasons it’s been tough is that wholesale beef prices have struggled and the only way to get them to respond was to reduce product availability. The monthly retail beef price data was released yesterday and April prices were the highest for any other month in history, taking out the prior high made October 2023 by pennies. Year-to-date the average retail beef value is $7.87 per pound.

The USDA just released it actual carcass and slaughter data and steer carcass weights continue to counter seasonally increase. Steer carcasses for the week ending May 4 weighed 923 pounds, up 3 pounds from a week ago and 28 pounds above a year ago. This fact is both remarkable and unprecedented for spring. Weights ‘normally’ bottom at Memorial Day. With yield grade 4s and 5s making up 25% of the kill, it begs the question of just how big and fat can the industry push the fed cattle out-weight envelope?

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