The new high for the move and lower close leaves October cattle vulnerable to increased technical selling and profit-taking selling over the near-term. The surge up in the Texas cash market to the $126.00 to $127.00 level late Wednesday, up $2-$3 from the week prior left traders nervous over hefty losses for packer margins into next week and the possibility that packers cut-back on kills.
While the cash market has seen strong gains in the past several weeks due to tightening feedlot supply, beef prices have not kept pace, and this has pushed margins deep into the red. Traders are fearful that consumers will resist increasing beef prices at a time of sharply higher gasoline prices and cheaper pork prices.
October cattle surged to a new 6-month high yesterday and closed lower. The supportive tilt early on was linked to stronger than expected cash cattle prices, improving wholesale beef demand, and a weaker corn market. Kansas cash trade was up $3 from last week to $127.00. Thoughts that supplies were beginning to tighten up was supportive to the cash market as traders see lower placements back in March and April as a reason to suspect tighter supply ahead.
Weekly U.S. beef export sales for the week ending September 6th came in at 16,800 metric tonnes, compared with the prior 4-week average of 17,325. Cumulative sales for 2012 have reached 681,900 metric tonnes, up 3.5% from last year's pace.
Cattle Slaughter was reported at 128,000 vs. 124,000 last week and 127,000 vs. last year. This brings the total for the week so far to 500,000 head, up from 383,000 last week at this time but down 25,000 head from last year's pace.
Boxed beef cutout values were down 16 cents at mid-session yesterday and closed 31 cents lower at $191.40. This was down from $191.56 the prior week and to a 4-session low. Average dressed steer weights for the week ending September 1 came in at 865 pounds, down from 867 the previous week but still up from 845 pounds last year. Beef production for the same week came in at 506.2 million pounds, down 3.75% over year ago. Slaughter that week was down 5.95% from last year but the higher weight is boosting production.
*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.