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While a bounce in the stock market might relieve some of the selling pressures from demand fears, the short-term cash fundamentals continue to weaken and this is likely to encourage trend-following funds to sell more, index funds to continue to liquidate longs and commercial buyers to stand aside. Cash cattle in the southern plains lightly traded at $80.00-$81.00 yesterday, down $2.00-$3.00 from last week. Nebraska cattle traded $78.00-$80.00, down $2.00 from last week. The inability of beef prices to stabilize despite the declining production of all meats in the US suggests that prices are not low enough to clear supply. The weakness could be a combination of weak consumer demand for meat and also a larger per capita supply of pork and poultry as exports continue to slide. With currencies and economies of Russia and Mexico not conducive to importing US meat, the internal US meat supply could be considered burdensome. April cattle closed 130 lower on the session yesterday with a three-day set-back of more than 500 points leaving the market in an oversold technical condition. Recessionary pricing for beef and the collapse in the stock market helped to provide selling pressure. Some deliveries and ideas that beef prices will need to move low enough to clear the near-term supply in a weak demand environment has helped drive the market lower this week. There were no new deliveries this morning with 15 re-tenders. The estimated cattle slaughter came in at 120,000 head yesterday which was well below trade expectations and suggests weakening demand from packers to move cattle through the pipeline. This brings the total for the week so far to 357,000 head, down from 372,000 last week at this time but up from 350,000 a year ago. Boxed beef cutout values were down 47 cents at mid-session yesterday and closed 85 cents lower at $134.86. This was down from $137.15 a week ago. Packer margins are deep in the red so the downtrend in beef prices is still a negative force even if the lower cash cattle price might help mend profit margins. Producers were already loosing near $200/head last week with cash at $83.00 so the cash weakness this week should push losses even deeper. For the Cattle-on-Feed report on Friday, traders look for a February 1st on-feed supply near 94% of last year, placements in January near 3% above last year and marketings down near 7% from last year.
TODAY’S GUIDANCE: A bounce in the stock market might help slow the selling in cattle but more unemployment news may keep the demand tone weak.
