The Cattle Market Ends Week on a High Note
The cattle market wrapped up the week on a positive note.
The soon-to-expire December contract was up 1.85, the February +1.02, and the April 0.97. The December today pushed to new contract highs. The April made new contract highs itself yesterday. Traders have been impressed with packer interest for fat cattle for now three weeks. Moderate sales at steady to higher have been noted this week.
We expect the same for the Friday afternoon sales ahead, mostly $119. This is a good rally off the $107 cash cattle low from the last week of August.
This week’s cattle kill came in about as expected. However, this is still a bit larger than we were expecting a month ago for this time frame. USDA’s weekly packer survey showed a 654,000 head kill for this week. That was next to our 653,000 morning estimate.
This week’s kill is 4.2% over last year. Last week was 4.3% over last year. The four weeks before these two averaged a 1.1% larger than last year kill. Beef production this week ran 542.1 million head. That is 3.6% over last year. Of interest, this cash cattle rally has not been deterred by this week or last’s big numbers.
Yesterday’s weekly Actual Slaughter report showed that both steer and heifer weights are 0.4% under last year as of the week ended 12/7. Weight data is taking a back seat to the numbers showing up.
Yesterday’s beef export sales showed still good numbers for 2018 shipped product. Bookings for 2019 shipments are a bit behind last year at this time, -20%.
Current CME futures, along with normal basis applied for each specific timeframe, imply $119 this month, $122 in February, $127 in April, and $118 in June. There is a bullish argument for Q1 up ahead, lower supply seasonally. However, futures have a good premium already factored in.
There are no forecasts for winter storms in the next 10 days in the Plains. Also, we can’t get carried away with bullish hopes here. 2019 will see higher production and overall slightly lower prices than 2018 unless there is a shake-up in percentage ownership of the retail dollar (lower packer margin/lower end user margin).
Next week we have Cattle on Feed on Thursday and Cold Storage on Friday. We expect November COF placements 2% to 7% under last year. That is likely already factored in.
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