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Beef prices hit record-high levels, processing numbers drop

Cattle could quickly back up, analyst says.

While June Cattle futures prices continue to trade at a steep discount to the cash market, slaughterhouse closures have kept the slaughter pace very slow, and cattle could quickly back up in the country.

The USDA estimated cattle slaughter came in at 85,000 head yesterday. This brings the total for the week so far to 255,000 head, down from 284,000 last week at this time and down from 356,000 a year ago. Beef prices are up 19.6% in just one week to a record high, and this will give plants the incentive to try to catch up.

The record-high beef prices refer to the USDA Boxed Beef Cutout, which is a wholesale price (on a dressed carcass basis that is formulated off of prices for various beef cuts) that is based on reported trades between packers and grocery store chains, food service companies, and the like. Yesterday’s choice cutout value of $275.75 was the highest on record going back to at least 1987. The previous high was $265.59 from May 19, 2015.

Even with the surge higher in beef prices in March, cold storage data was considered bearish, as the industry did not pull beef from frozen stocks. It will be important to get slaughter plants up and running efficiently soon, as beef prices may get a further boost as restaurants reopen.

June cattle futures prices closed slightly lower on the session yesterday after the early rally failed to find new buying interest. Traders remain nervous with the large number of slaughter plants that are idled or closed due to COVID-19 issues. 

The huge discount of the futures to the cash market and the surge higher in beef prices are factors that have limited the selling.

The USDA boxed beef cutout was up $11.14 at midsession yesterday and closed $15.90 higher at $275.75. This was up from $230.53 the previous week and $234.11 a year ago. It was also a new all-time high. The cutout has gained $43.02 in the last 10 sessions and $25.72 in the last three.

Cash live cattle traded in light trade on Wednesday at lower prices or at the low end of Tuesday’s ranges. In Kansas, 449 head traded at 100, down from 105 on Friday.

In Nebraska, 185 head traded at $92.25, down from $94 to $105 and an average price of $95.61 on Tuesday. And in Texas/Oklahoma, 226 head traded at $93, down from $98 to $100 on Monday and Tuesday. Wednesday volumes were low relative to Tuesday.

For the USDA monthly cold storage report, frozen beef supply at the end of March reached 502.4 million pounds, up 11.2% from last year and up 1.6% from the previous month.

Stocks normally decline by 1.4% for the month, so the 1.6% increase is considered a bearish development. 

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Story written by Terry Roggensack.

For more information, contact Terry Roggensack, The Hightower Report:

Phone: 800-662-9346 

Email: info@hightowerreport.com

Web: hightowerreport.com

Twitter: @HightowerReport

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