While consumer sentiment has seen solid gains in recent months and economic news has clearly come in better than expected, the fears that consumer sentiment (and consumer demand for beef) could take another hit ahead of the fiscal cliff was one of the key negative forces to knock down cattle futures this week. The break in futures was a bit of a surprise given a surge in beef prices to the highest level since October of 2003 and just shy of record highs. However, traders see consumer resistance to higher beef.

Slaughter looks to continue to tighten in the weeks ahead and December futures pushed to a discount to the cash market. December cattle saw some choppy trade near unchanged on the session early yesterday but aggressive selling emerged to drive the market sharply lower and down to the lowest level since October 1st. Disappointment that cash cattle could not trade higher even with the surge up in beef prices helped to spark the selling. Long liquidation selling was noted. Cash cattle traded at $127.00 in Kansas and then Texas, which is unchanged from last week.

Weak packer margins, continued weakness in the stock market and fears of a shift lower in consumer demand for beef helped to pressure. Weekly U.S. beef export sales for the week ending October 18th came in at 16,600 metric tonnes, compared with the prior 4-week average of 13,750. Cumulative sales for 2012 have reached 764,400 metric tonnes, up 1.9% from last year's pace. Slaughter came in well above trade expectations at 126,000 head, which can sometimes mean firm demand for inventory from the packer. This brings the total for the week so far to 492,000 head, down from 497,000 last week at this time and down from 519,000 a year ago.

Boxed beef cutout values were up 20 cents at mid-session yesterday and closed 1 cent lower at $199.37. This was up from $196.81 the prior week. Average dressed steer weights for the week ending October 13th came in at 880 pounds, unchanged from the previous week and still at a record high level as compared with 858 pounds last year.

Slaughter for the same week was down 5.4% from last year but the hefty weights left beef production at 504.5 million pounds, down just 3.2% over year ago.

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