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The market started the week with expectations that cash cattle would trade at least $1.00 higher at $84.00 this week but after the action of the past few days, traders are now hoping to see steady on the week. Packers pulled bids of $83.00 and bids emerged late yesterday at $81.00 with offers at $85.00-$86.00. There seemed to be plenty of optimism late last week and early this week that consumer demand would pick-up and that beef would begin to move more swiftly through the pipeline and that warm spring weather could jump-start the better demand season ahead. However, beef prices remain sluggish and weather turned sour across much of the country and this weekend looks cold and damp for many areas of the country. April and June cattle broke below their 5-day consolidation yesterday to their lowest level since they broke out to the upside on March 19th. Early gains in the equities did not appear to lend much support to cattle, but when the equities fell later in the day, they seemed to lead cattle lower. Boxed beef cutout values at mid-session were up 58 cents and closed down 8 cents to $135.39 as compared with $134.34 last week at this time. This was disappointing to the bulls. Slaughter came in at 122,000 head which was near the low end of expectations and may suggest weak packer demand and this pushed cumulative slaughter for the week to 365,000 head from 362,000 last year at this time. With weak demand from restaurants and about half of the demand for beef coming from restaurants and fast food chains, packers are seeing record weights and get about 25 pounds of extra beef per animal this year compared with last year. The sluggish marketing pace showed up in last Friday’s Cattle-on-Feed report and is also showing up in the weekly steer weights. Commercial hatcheries set 200 million eggs in incubators for the week ending March 21st which is down 8% from last year. This would suggest tightening supply of poultry in the weeks ahead.
TODAY’S GUIDANCE: The slower than expected marketings pace from feedlots has pushed weights higher and left the market with the need to absorb a little extra beef over the near-term. Deep in the red packer margins leaves traders “hoping” for steady cash cattle trade this week as compared with expectations of at least $1.00 higher to start the week and this leaves April at a stiff premium to the expected cash trade. Look for June cattle to continue to gain on April with a target of -35 points to June. April resistance is at 85.10 with support back at 84.07 and 83.60.
TODAY’S MARKET IDEAS: Look for a further break in the short-term. Buying support for June cattle comes in at the 82.15-81.75 zone with 85.10 as an eventual upside target.
