Deliveries on first notice day failed to pressure and futures have pushed higher overnight. With high weights, it will be important to see producers active with marketings which will help clean up any backlog of cattle in feedlots. The cash market, however, does not act like there is excess supply as supply still looks to tighten ahead.

The estimated cattle slaughter came in higher than expected at 128,000 head yesterday, which could be a sign of improving packer demand. This was up from 126,000 last week but unchanged from a year ago as this time. Boxed beef cutout values were up 62 cents at mid-session yesterday and closed 58 cents higher at $190.57. This was up from $189.19 the prior week. The higher beef trend in recent days has helped support the bounce to near 10-session highs this morning.

There were 24 deliveries posted on 1st notice day. December cattle put in the highs early in the session yesterday at 67 higher on the day and futures closed up 20. The market managed to trade higher and to test last week's highs despite bearish outside market forces, weaker beef prices on Friday and a sluggish demand tone. Traders thought the market would work lower early but the outlook for tightening supply ahead has helped to provide underlying support. There were also some concerns for October deliveries.

Slaughter last week was 49,000 head below last year's pace. On the other hand, weights are at a record high, and this has helped offset some of the impact of the smaller supply. The COT reports on Friday showed a long liquidation trend from fund traders but this selling seems to have slowed.
 

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