December cattle closed 32 higher on the session yesterday, although rising 120 points from the early lows. February cattle also closed strong as a large rally in the beef market is thought to be helping support the market. Expectations that weaker packer profit margin and sluggish European and US economies would pressure beef and cash cattle prices through the end of 2011 may have limited gains in cattle futures until the last few sessions. The market also seems to be absorbing a higher than expected feedlot supply which helped to pressure cattle futures during recent weeks. Cash cattle prices hit a record high and the outlook for declining supply in 2012 is widely seen as a supportive underlying force. The beef market remains in a solid uptrend, recently pushing to its highest level since October 20th, 2003. Boxed beef cutout values were up $1.29 at mid-session yesterday and closed $1.20 higher at $195.45. This was up from $189.25 the prior week. A combination of an expanding beef pipeline in the US and the need for packers to secure export business may help support the strong beef market. With Wal-Mart recently starting to stock some 3,800 stores with choice beef for the first time, the market may be facing very strong demand for a while. For the Cattle-on-Feed report on Friday, many traders have a wide range of estimates for placements of cattle during October although most traders look for a slight decline from last year. October Marketings are expected to be up near 1.5% from last year and traders see November 1st On-Feed supply near 4% above last year. While some traders believe that the large supply at feedlots is a negative force, an active placement of cattle onto feedlots for much of this year has pushed the animals more quickly through the pipeline and may have left fewer cattle available for slaughter next year. In addition, the slowdown in placements into late this year and the recently improving moisture for the southern plains might cause replacements next year to be down sharply from 2011. If there is expansion of the cattle herd into 2012, more female cattle will be held off of the market for breeding purposes. This could tighten the beef supply situation even further for 2012. The estimated cattle slaughter came in at 125,000 head yesterday. This brings the total for the week so far to 377,000 head, down from 387,000 head last week at this time and down from 393,000 head a year ago.
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