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Cattle appears to have moved low enough to find better demand for a recessionary period but the surprise bearish demand factor has been that pork values are not low enough to clear supply. In the case of cattle, while feedlot supply is down near 6% from last year, cattle prices are down 8.7% from last year and February futures are at a discount to the cash. Cold weather could cause supply disruptions in the northern plains. April cattle closed 75 lower on the session yesterday but managed to close 140 points off of the lows of the day. A sharp break in the US stock market and weak economic news helped spark some initial aggressive selling in cattle and long liquidation selling emerged as stops as the market moved under Monday’s lows. A firm tone to the beef market and ideas that cash cattle may trade steady to higher this week helped support. Boxed-beef cut-out values jumped $1.37 at mid-session and closed 64 cents higher at $149.90. This was up from $143.49 a week ago. The estimated cattle slaughter came in at 112,000 head yesterday. This was well below trade expectations and could mean that packer demand is not quite as firm as expected. This brings the total for the week so far to 357,000 head, up from 352,000 last week at this time but down from 378,000 a year ago. In the summer and fall, feedlot placements were of heavier weight animals and the shift in beef production from the 4th quarter to the 1st quarter of 2009 is one of the smallest declines in 9 years. As a result, the seasonal forces are less of a positive influence for the current time frame. In addition, average steer weights have remained higher than normal as weather has been less of an issue than normal. The Broiler Hatchery Report out yesterday showed eggs set into incubators at 94% of last year and suggests a continued poultry production trend of down 6-8% from last year for the months just ahead.
TODAY’S GUIDANCE: The move to take April cattle discount to the cash market failed to see follow-through selling and this could mark a near-term low. Economic fears persist but total meat supply is tightening. If cash trades steady, February may look too cheap.
