April cattle closed sharply lower yesterday and just off the lows of the session. Monday's weakness pushed prices down to a new 8-session low and marked a 285 point slide from last week's high of 131.50. The cattle market had traded as much as 50 higher earlier in the day due to supportive news from the USDA Cattle-on-Feed report from Friday. Ideas that the market may need some time to absorb higher beef prices and that that it will take further gains in beef in order to revive packer margins were seen as negative factors for cattle prices. Many traders remain concerned that higher beef prices will slow consumer demand, especially in combination with rising gasoline prices. Retail prices for beef hit a record high for January, with forecasts for tightening supply being the foundation for this rally. Beef production normally increases in the second quarter from the first quarter at the same time that demand increases into the spring barbeque season. However, beef production this year is expected to drop from the first quarter for the first time in at least 21 years. An unexplained virus has spread from Germany to England in January, and has already been reported in 74 farms. The virus impacts sheep and cattle and it causes still born and birth defects. There have been 1,000 reported cases in Europe since the first sign of the virus last summer in the German town of Schmallenberg. It is called the Schmallenberg virus. Boxed beef cutout values were up $1.33 at mid-session yesterday and closed $1.14 higher at $198.56. This was up from $191.81 the prior week and is the highest beef market since 200.65 on October 20th, 2003. The estimated cattle slaughter came in at 122,000 head yesterday, up from 104,000 head last week but down from 126,000 head last year at this time.
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