The slowdown in slaughter and the sharp break in beef prices could weigh on the futures market over the near-term. If consumer demand is weak, packers do not want to get caught holding excess supply, which might be the reason for the set-back in slaughter this week.
Slaughter came in well under trade expectations at just 111,000 head, which could be a sign of weak demand for new inventory from packers. This brings the total for the week so far to 357,000 head, down from 366,000 last week at this time and down from 377,000 a year ago.
Boxed beef cutout values were down $1.37 at mid-session yesterday and closed $3.40 lower at $194.77. This was down from $199.38 the prior week and is the lowest beef market since October 15th. Packer margins were already deep in the red going into the storm-related demand factors and the sharp break in beef prices this week should discourage packers from paying higher or even steady for live inventory ahead.
December cattle closed moderately lower on the session yesterday and gave back a good portion of Tuesday's gains. Traders were having second thoughts about the short-term demand situation after the sharp set-back in beef prices. The market saw choppy to lower trade early before trading just slightly lower on the session into the mid-day. Positive trade in hogs and strength in other commodity markets like gold and crude oil helped to support.
Choppy trade for the stock market and uncertainty over short-term beef demand following the east coast storm helped to pressure.
Cash traded steady to lower this week and the recovery in beef prices over the past few sessions plus talk that market-ready supply could remain tight into November helped to provide some underlying support.
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