June Begins with Mixed Signals

Last week’s much smaller than expected federally inspected cattle slaughter of 537,000 head was a shocker to industry observers, as most expected 550,000-560,000 range. It was rumored one of the three major beef packers had chosen to opt out of the Saturday kill. The result is one of the smallest, if not the smallest, Memorial Day kill in memory. Specifically, slaughter was down a whopping 10 percent from the same holiday kill a year ago. What’s harder to fathom is why such a small kill with packer margins in the black.

Still even with the smaller slaughter, boxed beef cutout prices appear to have topped last week, although the 537,000 kill coupled with a stunning summer weekend may cushion the seasonal descent. Expectations for this week kill are in the 615,000 to 620,000 range.

         Fed Cattle Outlook This Week

Cash cattle this week are generally expected to trade with a steady to lower undertone; though last week’s brisk trade left cattle feeders in good shape. Currentness is excellent. Live cattle futures are likely to trade in a choppy fashion, supported by their discount but limited on rallies by the seasonal. Last week’ low in most active August LC of $136.60 is critical support along with the 40 day moving average of $136.30.

         Cheaper Corn; Stronger Feeder Cattle

Excellent weekend rains in much of the western to central Corn Belt and the growing realization that the summer of 2014 may produce an enormous crop, (not to mention great grazing conditions) are providing support for already bullish feeder cattle. Feeder cattle futures checked last week’s life-of-contract highs already this morning. This market may be overbought and subject to technical corrections at any time, but the long term bull trend is intact and cheaper corn will only add fuel to the fire.

2014-06-02_Chart1

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