Packer margins were deep in the red to start the week and the sluggish action for beef prices sparked selling early yesterday. The selling snowballed to include massive fund selling to drive the market sharply lower yesterday as stops were activated and technical selling intensified as moving averages were taken out.

There were light bids in the cash market in Texas, which emerged at $122 with offers this week at $127.00 as compared with $126-$127 trade last week.

December cattle closed sharply lower on the session yesterday as long liquidation selling emerged to drive futures to the lowest level since July 26th. The market traded sharply lower on the day into the mid-session as there seemed to be "less" confidence that the cash market can hold steady on the week with packer profit margins moving deep into the red. While supply is still tightening ahead, traders see significant resistance from consumers to higher beef prices and the demand tone is weak.

Slaughter weights are already near record highs and traders see a potential slowdown in cattle slaughter forced by the packer as a reason to suspect a loss of "currentness". Sluggish beef prices, even with positive news on consumer confidence, added to the negative tone. Traders see a slightly higher showlist this week and weaker trade in the cash.

The break under the September 17th lows helped spark additional long liquidation selling. In the last COT report, non-commercial traders (funds) held a net long position of nearly 60,000 contracts.

The estimated cattle slaughter came in at 128,000 head yesterday, which was a bit higher than expected. This brings the total for the week so far to 256,000 head, up from 255,000 last week at this time but down from 260,000 a year ago.

Boxed beef cutout values were up 7 cents at mid-session yesterday and closed 1 cent lower at $192.68. This was down from $194.27 the prior week and is the lowest beef market since September 14th.

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