We remain concerned that the demand impact on the East Coast may have been underestimated as consumer restaurant and consumer retail outlet demand was down sharply, and this may have clogged the beef pipeline and likely take time to clear up the backlog. With packers already pushing average steer weights to a record high, the clogged pipeline is an issue and packers do not really have the luxury of slowing down the slaughter pace. Beef prices are on a steep downtrend and need to push down to a level which will quickly clear any backlog. Here again, with beef prices right on record highs into the storm, finding this level quickly is a difficult task.

December cattle closed 10 higher on Friday and managed to close 17 higher for the week last week. A lack of a positive reaction in the stock market to news of better than expected employment helped to spark long liquidation selling to pressure the market early, but it failed to attract new selling and closed near the highs. The higher close was somewhat impressive given the weak action for the stock market, sharply lower beef prices and weakness in other commodity markets. Ideas that beef demand took a significant hit with the storm last week has been seen as a bearish force but this is beginning to be partially offset by talk that the re-stocking process this week might support demand.

Weekly U.S. beef export sales for the week ending October 25th came in at 14,600 metric tonnes, compared with the prior 4-week average of 15,450. Cumulative sales for 2012 have reached 779,000 metric tonnes, up 1.7% from last year's pace.

Slaughter came in at 125,000 head, which was higher than expected and a positive indicator for packer demand. Slaughter for the week totaled 643,000 head which was up 2,000 head from last week but down 7,000 from last year. Boxed beef cutout values were down $1.70 at mid-session Friday and closed 76 cents lower at $192.74. This was down from $196.82 the prior week and is the lowest since October 12th.

The Commitments of Traders reports as of October 30th showed Non-Commercial traders were net long 40,686 contracts, a decrease of 6,243 for the week and the long liquidation selling trend is seen as a short-term negative force. Non-Commercial and Nonreportable combined traders held a net long of 18,929 contracts, down 5,774.

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