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.


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