June cattle saw the highest close since April 12th as higher beef prices and expectations for improving demand were thought to have supported the market.
Weekend beef demand for the last half of May and much of June is usually very strong. The pullback in gasoline prices during the past few weeks could free up disposable income for beef purchases. With a surge in cash corn values, many traders see placements of cattle into feedlots for May and June coming in well below last year's levels. This will help to tighten the supply of market-ready cattle during the late summer and fall. Cow slaughter was very active during the early summer last year as a drought began to reach into the southern plains. This summer, excellent pasture and range conditions may help to keep cow slaughter levels down. The USDA has projected third quarter beef production to be down 40 million pounds from the second quarter. Production typically increases 100 to 200 million pounds during that period, and it was up 178 million pounds in 2011. This year's second quarter decline will be the first since 1996 and only the second decline during the past 22 years. In 1996, August cattle bottomed in late April and then posted contract highs in August. In 2008, August cattle made a significant low under 92.00 in late April and then rallied up to 106.15 by June 20. Boxed beef cutout values were up 31 cents at mid-session yesterday and closed 69 cents higher at $191.51. This was up from $191.18 the prior week and is the highest beef market since March 19th. The estimated cattle slaughter came in at 125,000 head yesterday. This brings the total for the week so far to 370,000 head, up from 364,000 head last week at this time but down from 384,000 head a year ago.