The cattle market and the industry are in a tricky situation as the likelihood of declining weights and declining feedlot supply clash with the possibility of increased flow of cows and non-fed cattle on the market.
In addition, while beef supply may be tightening, the short-term supply of other meats is on the rise, and this could add to the short-term meat supply that the industry will need to absorb.
Feeder cattle have consolidated in the past few weeks after the initial decline into mid-July but do not seem low enough priced to encourage feedlot operators to move more animals on feed. Poor pasture and range conditions leave little choice for some producers and the jump in supply and weak demand into the fall still remains a potential bearish force.
October cattle closed lower for the third session in a row yesterday as a lack of new buying interest and a steady flow of profit-taking helped to pressure. This occurred in spite of talk of tighter short-term supply and rising beef prices. Ideas that colder weather could boost short-term demand added to the positive tone and helped support solid gains overnight. October cattle saw some buying support early yesterday but gave back the early gains to close lower. News of 71 deliveries against the August contract helped to limit the advance.
A recent bounce in beef prices, talk of stronger demand for the Labor Day holiday and talk that this week's showlist is smaller added to the positive tone early in the day. The premium to the cash market appeared to be a limiting force on the upside.
Slaughter came in a little higher than expected at 128,000 head. This brings the total for the week so far to 254,000 head, up from 248,000 last week at this time but down from 256,000 a year ago.
Boxed beef cutout values were up $1.28 at mid-session yesterday and closed $1.41 higher at $179.90. This was up from $177.82 the prior week and is the highest beef market since July 19th.
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