February cattle closed sharply higher on the session yesterday and rose to the highest level since December 2nd. In addition, a strong overnight rally took prices up to the highest level since November 8th. Supportive news for the US and global economies along with continued talk that cattle supply will tighten ahead helped to support the market early in the session. For the USDA report after today's close, many traders see feedlot placements for the month of December down nearly 6% from last year. With one day less, December marketings are expected to be down nearly 3% from last year. As a result, the January 1st on-feed supply is expected to come in near 3.3% higher than last year. For much of 2011, lighter than normal weight feeders were moving onto feedlots due to the Texas drought, and this may suggest that the market-ready cattle supply will be spread out during the months ahead so the short-term market-ready supply could still be tight. News that packers raised their bids $1.00 to $121.00 in Texas was seen as a positive market factor as well, with asking prices at $125.00-$126.00. While packer margins are deep in the red, a need to fill future orders has prompted the more aggressive stance from packers. Poultry production for the first quarter is expected to drop 5.3% from last year, and this has helped push weekly poultry prices to a new record high, which may also be seen as a positive influence for cattle. Offsetting the beef weakness was a surge in feeder cattle to yet another new all-time high. The estimated cattle slaughter came in at 119,000 head yesterday. This brings the total for the week so far to 506,000 head, down from 515,000 head last week at this time but up from 505,000 head a year ago. Boxed beef cutout values were down 80 cents at mid-session yesterday and closed 99 cents lower at $181.54. This was down from $186.75 the prior week and is the lowest beef market since September 9th. Average dressed steer weights for the week ending January 7th came in at 851 pounds, up from 847 pounds the previous week and down from 856 pounds last week. Beef production for the same week came in at 436.8 million pounds, down 2.19% over year ago.
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