The outlook for a tightening supply ahead and ideas that previous and recent liquidation phases for the industry have left the market will less beef supply has helped to support a turn higher.
Third quarter beef production is expected to be down 1.7% from last year and 4th quarter down 4.4% from last year. In addition, the shift in production from the third quarter to the 4th quarter (down 415 million pounds) is the third largest decline on record.
October cattle surged higher early in the session yesterday led by fund trader buying and spent much of the rest of the session recovering from the mid-session set-back to close back up near the highs. A sense from traders that some packers are still a bit short-bought and talk that the five deliveries from Tuesday night went into strong commercial hands helped to support. There were no new deliveries overnight.
October cattle managed to hold the 50% retracement mark of the July to August rally at 123.40 on Monday and Tuesday and when the early low yesterday was just 123.50, technical traders turned active buyers as well. The lack of new selling interest, ideas that the cash market will firm up in the next few weeks due to tightening supply and some talk that beef prices could stabilize near current levels for the next week helped spark short-covering and new buying.
April cattle pushed to a new contract high and to a new all-time high for the April futures. Feeder cattle closed higher in spite of run higher in corn.
Slaughter came in below trade expectations at 123,000 head. This brings the total for the week so far to 376,000 head, down from 382,000 last week at this time and down from 382,000 a year ago.
Boxed beef cutout values were down 31 cents at mid-session yesterday and closed 99 cents lower at $190.92. This was down from $193.73 the prior week and is the lowest beef market since August 15th.
*Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts.