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The market needs to see signs of better demand to see more than a technical bounce and the continuation of weak cash market news this week leaves futures vulnerable to following the beef market and the cash market lower over the near-term. Traders continue to believe that tightening supply into later this year could provide some support but so far this has not been the case. In the southern plains, cash cattle traded $1.50 lower on the week to $83.00, about $2.00 below expectations from earlier this week. Boxed beef cutout values were down $1.04 at mid-session yesterday and closed $1.43 lower at $136.25. This was down from $140.34 a week ago and the lowest beef trade since April 3rd, 2009. December cattle closed sharply lower on the session yesterday with an outside day down. The market saw an upside break-out in the overnight session but weakness in the stock market, a sharp rally in the US dollar and a sharp break in other commodity markets helped pressure. In addition, beef prices were down sharply and export sales news was weak. Weekly US beef export sales for the week ending September 24th came in at 8,800 metric tonnes as compared with 11,100 tonnes as the prior 4-week average. This pushed cumulative exports for the year to 396,100 metric tonnes, down 15.5% from last year. The estimated cattle slaughter came in at 121,000 head yesterday which was well below trade expectations and suggests that packer demand is weak. This brings the total for the week so far to 494,000 head, down from 503,000 last week at this time and down from 504,000 a year ago. Average dressed steer weights for the week ending September 19th came in at 867 pounds, down from 869 the previous week and up.8% from a year ago. The previous week was a record high. Beef production for the same week came in at 514.1 million pounds, down 4.4% over year ago.
TODAY’S GUIDANCE: The technical action shifted from bullish early yesterday to bearish into the close. Weakness in beef and cash cattle leaves the premium structure in futures in doubt and a continuation of the downtrend in December cattle leaves 83.10 as the next downside target. Resistance is at 85.27 and 85.55.
