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Cattle Prices Continue Getting Hit

The week’s kill came to 601,000 head. That ran a little over our 594,000 estimate from the morning. We can’t really call it bearish, though. This is still under the year’s peak that was posted three weeks ago at 615,000. Allendale has asserted that the October and November kill may run around 600,000 head. It would appear that our call for lower supplies in the fall, off the year’s peak kill, is so far on track. On the other hand, in the bizarre meat world, the traditional rule of lower supplies equals higher prices does not apply. To clarify, two weeks ago, the kill was 615,000 head and the week’s beef production was 517 million pounds. This week’s kill ran 601,000 and a beef production of 503 million was posted. During this two-week stretch, cash prices fell from $102 to $98.

As has been the case for some time, cattle prices are being hit partially by higher beef production, but mostly by artificial pressure caused by excess meat at the end user/retail level. Cow/calf producers have been in liquidation since spring/early summer, but that actually means higher production in the initial phase. Pork and chicken producers have not even started liquidation. Combined with the higher beef supplies next year, we are not looking forward to 2017 supplies or pricing.

For those shocked about the break below $100, which we should all be, don’t forget that we traded cash down to $81 as recently as 2009. This is right in the $80 to $90 price range that analysts are throwing out for a potential low price for next year. Heck, this market is trying to price in that washout price in this quarter.

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