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The market is probing for a low but it will take some positive demand news and higher beef prices to assume a low is in place. The market has the supply fundamentals to move higher into the fall but demand has remained weak and this has led to sluggish and slower than expected marketings. Friday’s USDA report indicated that marketings in August were the lowest on record for the month of August since the series began in 1996. The slow marketings combined with excellent weight-gain weather have led to higher than expected weights which could cause beef production to come in a bit higher than expected. December cattle inched lower in quiet trade yesterday as sellers were quiet after a 3-day collapse into Monday’s lows. The market saw an inside trading session as short-term cash news remains somewhat negative but the market is oversold and beef prices are inching higher so there was a lack of new selling interest. Sluggish marketings and weights pushing higher recently has traders seeing a little more beef into the 4th quarter than expected. Boxed-beef cut-out values at mid-session were up 57 cents but closed 25 cents lower at $141.18. This was down from $142.79 a week ago. This is the lowest beef market since August 13th. The monthly USDA Cold Storage report showed end of August frozen beef supply at 426.4 million pounds, down 3% from last year and down 4% from the previous month. This should be considered a positive demand indication as stocks normally increase by 5% from the previous month. The estimated cattle slaughter came in at 125,000 head yesterday. This brings the total for the week so far to 250,000 head, down from 255,000 last week at this time and down from 254,000 a year ago.
TODAY’S GUIDANCE: The sharp rise in open interest on the recent break suggests that buyers are still active which could lead to more volatility ahead. While oversold, there is still no technical sign of a near-term low. The downside swing objective for February cattle is down at 84.72 which might hold as a longer-term support level. December should test support at 84.07.
