The market seems poised for further strength over the near-term as cash markets look to see further gains this week and beef prices could remain firm into mid-November. The showlist is smaller this week and commercial bids emerged at $122.00 in the cash market as compared with offers at $127.00-$128.00. Packer margins are still in the red but are less negative than last week given the solid gains in beef.
December cattle pushed higher for the 3rd straight session yesterday and made a new high for the move and managed to push to the highest level since September 25th in overnight action. Solid wholesale beef demand along with a sharply lower US Dollar added support. Boxed beef cutout values were up 85 cents at mid-session yesterday and closed 61 cents higher at $195.71. This was up from $190.98 the prior week and is the highest beef market since June 28th. Expectations that the cash market trend could remain up into early December also helped to support. The deliveries from Monday were absorbed by commercial traders and no new deliveries were made for the past three sessions.
Cattle slaughter came in at 123,000 head, which was down from 127,000 a week ago and 130,000 for the same period last year. The lower than expected slaughter can sometimes suggest that packer demand is weakening. This brings the total for the week so far to 376,000 head, down from 382,000 last week at this time and down from 383,000 a year ago. However, positive economic news and continued strong beef prices have helped to support optimism for demand. Some in the trade suggest the market is positioning ahead of Friday's Cattle on Feed report where traders expect placements on US feedlots to be down by about 15%. Tightening supply of available feeder cattle, drought in the US and surging feedgrain and hay prices are factors which likely contributed to the lower placements, which could come out at the lowest level for September since the new series began in 1996.
Marketings are expected to be down about 10% in September, and this is mainly due to the fact that there were two less days for marketings this year as compared with last year. On-Feed supply is expected to come in near 2.0-2.5% below last year for October 1st.
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