The market continues to push higher with tightening supply expected to continue to support the cash market. Cash traded at $123.00 in the southern plains last week and traders see higher prices ahead. Factors which could derail these expectations include higher than expected weights, higher than expected pork and poultry production into the fall as breeding animals are liquidated and weakening economic prospects.
October cattle saw choppy and two-sided trade early yesterday but closed just slightly higher on the day with quiet trade. The market pushed up to the highest level since August 16th. Packers paid-up for cattle last week in spite of sluggish beef prices as upfront market-ready supply were said to be tight.
Packer margins are still in the black but well down from just a few weeks ago. The 2013 contracts were also higher with the April contract matching last week's contract and all-time highs.
Slaughter came in higher than expected at 130,000 head. This brings the total for the week so far to 132,000 head, down from 253,000 last week at this time but up from 128,000 a year ago. Boxed beef cutout values were up 95 cents at mid-session yesterday and closed 83 cents higher at $190.45. This was down from $191.98 the prior week. Beef prices pushed higher after choppy to lower trade for much of the past few weeks.
The COT set-up looks a bit negative and traders remain concerned over the premium of 2012 contracts to the cash market in an environment where we could see an increase in non-fed and cow slaughter into the fall.
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