October cattle posted the highest close since April 12th yesterday as many traders feel that a surge higher in beef prices last week will contribute to higher cash markets ahead. On the other hand, few traders are concerned with the stiff premium of futures prices to the cash market, with record high steer weights or with the possibility that short-term slaughter levels could see a jump as pasture conditions deteriorate into the fall. In addition, a surge in feeder cattle due to the selloff in the corn market provided support for cattle futures as well.
Third quarter beef production is on track for a 7-year low as dwindling supply after culling of herds last year is taking a heavy toll throughout the industry. Many traders had earlier feared a more immediate and aggressive surge in non-fed cattle slaughter with the corn market over $8. Steer weights are at a record high for this time of the year, as feedlots continue to feed animals in order for them to reach heavier weights. This is expected to change during the months ahead, and some traders feel that this shift towards below normal weights could be the foundation for sharply reduced beef production during 2013.
Retailers are thought to be gearing up for their Labor Day promotions, and this has helped beef prices surge to the highest level since July 11th. Slaughter came in well below expectations at 122,000 head. This can sometimes indicate a sluggish demand tone from the packer. This was down from 126,000 head last week and down from 130,000 head a year ago as this time. Boxed beef cutout values were up $1.14 at mid-session yesterday and closed $1.94 higher at $186.89. This was up from $178.49 the prior week and is the highest beef market since July 11th.