While a bit overbought short-term, the market appears to have the supply news to move higher as long as outside market forces stay neutral to positive. A continued flow of positive economic news has helped to provide some demand support and tightening supply may continue to support. There are some concerns for a minor correction ahead of the USDA Cattle-on-Feed report but the trend looks up. Boxed beef cutout values were up $1.13 at mid-session yesterday and closed $1.10 higher at $196.81. This was up from $191.31 the prior week and is the highest beef market since June 27th.

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. Marketing's are expected to be down about 10% in September, and this is mainly due to the fact that there were two less days for marketing's 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.

December cattle backed off of the mid-session peak yesterday but still closed higher. The outlook for continued tightening supply ahead, low placement expectations for the USDA report this afternoon and solid gains in beef prices this week helped to support. Talk of the overbought condition of the market after trading higher for the 4th session in a row may have limited the advance. Traders await cash market trade this week and a lower showlist has helped support talk of higher cash trade. A lack of deliveries plus firm weekly export sales helped to keep buyers active as well. There were 9 new deliveries posted overnight.

Weekly U.S. beef export sales for the week ending October 11th came in at 14,500 metric tonnes, compared with the prior 4-week average of 12,850. Cumulative sales for 2012 have reached 747,800 metric tonnes, up 2.5% from last year's pace. Slaughter came in slightly below expectations at 121,000 head. This brings the total for the week so far to 497,000 head, down from 502,000 last week at this time and down from 508,000 a year ago. Average dressed steer weights for the week ending October 6th came in at 880 pounds, up from 873 the previous week and up from 855 pounds last year. With pencil to paper, it is "paying" producers to feed cattle out to a higher weight. This is a new all-time high in dressed steer weights. Beef production for the same week came in at 498.6 million pounds, down 5.01% over year ago but slaughter for the week was down 8.2%.
 

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