The market may have put in at least a temporary peak with the technical action this week. A reversal Wednesday and follow-through selling yesterday is seen as a negative technical development, and this could attract increased selling from fund traders. The outlook for a lull in demand after Labor Day bookings are complete, the premium of October to the cash market, continued deliveries and consumer sentiment concerns are factors which might attract some near-term selling pressures.
Traders will be monitoring the USDA report this afternoon to view the extent of placements of cattle into feedlots. With soaring corn values and negative margins, traders see July placements of cattle into feedlots down near 8-9% from last year but this will be up 18% from the previous month. In addition, marketings are thought to be near 1.5%-2.0% above last year. This is expected to cause August 1st on-feed supply to come in near 100.7% of last year as compared with the July 1st supply at 102.7%.
Average dressed steer weights for the week ending August 4th came in at 862 pounds, unchanged from the previous week and up from 845 pounds last week. The 5-year average weekly weight for that week is 843.8. Weights are near record high for this time of the year and traders see the shift from high weights to lower than normal weights into the winter as a primary driver of lower production. This will take time to develop and the market seems vulnerable to see an increase in non-fed and cow slaughter into the fall as operators choose to market, and not feed cattle through the winter.
There were 8 more deliveries posted overnight with 43 retenders. Boxed beef cutout values were up 44 cents at mid-session yesterday and closed 96 cents higher at $191.48. This was up from $182.52 the prior week and is the highest beef market since July 6th. October cattle closed sharply lower on the session yesterday and pushed to a 4-session low. Big deliveries, a reversal on the charts and talk of the overbought condition of the market helped to pressure.
Firm export news helped to pull the market up off of the early lows. However, technical selling took over as a prominent force as traders took profits after the recent strong uptrend. Weakness in the US dollar and a turn higher in the stock market, gold and crude oil added to the positive tone into the mid-day but the premium of futures to last week's cash may have been a limiting force and aggressive long liquidation emerged to spark the selling.
Weekly U.S. beef export sales for the week ending August 2nd came in at 18,500 metric tonnes, compared with the prior 4-week average of 15,825. Cumulative sales for 2012 have reached 595,800 metric tonnes, up 2.5% from last year's pace. Cash cattle bids are at $117-$118, with offers at $124. Slaughter comes in at 127,000 head, which was a bit higher than expected. This brings the total for the week so far to 505,000 head, up from 504,000 last week at this time but down from 517,000 a year ago.