October cattle closed slightly higher yesterday after choppy and two-sided trading early in the session. A weaker demand tone was noted by many traders early in the day due to pressure on global equity markets. However, the cattle market rebounded later in the day in conjunction with a turnaround in the stock market, higher beef prices and a continued firm outlook for the cash market. The market has consolidated last week's gains during the past few sessions and is attempting to absorb a potentially big placements number for July in the USDA Cattle On Feed report release after Friday's close. Initial estimates for the report suggest that July placements may have been as much as 17% higher from last year, which in turn has many traders looking for on-feed supply near 7.5% above last year. A severe drought in the southern plains has left little in the way of pasture and range for cattle, which may have brought about the current outlook for an aggressive placements number. The industry needs to see big placements during the months ahead in order to avoid significant tightness in beef supply into the 1st quarter of 2012. The USDA already predicts that beef production in the 1st quarter will be down 7.3% from last year. In addition, the shift lower for beef production from the fourth quarter to the first quarter is expected to be near a record, which could help enhance a seasonal tendency for an uptrending cash market during that time. The estimated cattle slaughter came in at 128,000 head yesterday. This brings the total for the week so far to 255,000 head, unchanged from last week at this time and unchanged from a year ago. Boxed beef cutout values were up $2.13 at mid-session yesterday and closed $2.73 higher at $184.32. This was up from $174.94 the prior week and is the highest beef market since April 27th. Weekly export sales this week should show a solid gain as 791 boxes are set to move out of the country as compared with 643 last week.
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