Unusual

By Cassie Fish, http://cassandrafish.com 

Wholesale beef prices continue to defy gravity, making new highs for 2024 this morning, despite the strong seasonal for a top by now. As long as this unusual but not totally unprecedented trend continues then support for the market in general may well continue. Packer margins are close to a scratch and even though there are only 7k fewer cattle on feed than a year ago, it will be difficult to break cash cattle prices as cattle feeders are rewarded for taking their time selling cattle. Record carcass weights and record number of yield grade 4s and 5s have had no negative market impact thus far.

The other time the wholesale beef market rallied through July, topping in mid-August, was 2014, when there was an acute grinding material shortage in the U.S. for both pork and beef. Cow slaughter in 2014 was low, averaging 103k head weekly. This year, the U.S cow slaughter dropped hard this spring thanks to widespread rains that have continued down hard through June. Through May, the U.S has imported 22% more beef, the majority of which is manufacturing beef, than a year ago. But even with the increased imports, domestic beef 90s continue to rally (see below) and lean fed cattle subprimals found mostly in the round but also in the chuck, also are supported.

The choice/select spread remains seasonally narrow compared to history, which supports this theory. The last five years that spread has traded over $20/cwt. Today it printed at $16.64/cwt. Neither the rib nor the loin have tested the 2023 highs while other items are trading premium to last year, such as coarse fed cattle grinds, and various round subprimals.

On the futures front, the August LC / October LC spread is correcting fairly dramatically today, after being pushed big time yesterday to a new high, culminating a move that took a couple of weeks to play out. Futures remain significantly discount to cash, which has been exceptionally strong, higher 6 out of the last 8 weeks and making an all-time high last week. June LC expires Friday and trading near the Texas average price from last week.

 

Copyright © 2024 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: