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The market is technically overbought and packer margins are still deep in the red but the uptrend in beef prices over the past week (up 2.7%) may be a signal that consumer demand is finally picking up with improving spring weather. If the beef trend continues, packers will be in a position to move cattle more swiftly through the pipeline and feedlots will stay more current. Cattle slaughter should also begin to increase seasonally so it will be important to see feedlots stay current and avoid any additional weight issues into the spring. June cattle ended the session yesterday unchanged on the day and at the highs of the day as futures recovered 65 points off of the early lows. A firm tone for the cash market and a rally in beef prices over the past few sessions helped to support but weakness in the stock market, weakness in energy markets and talk of the overbought condition after the run up last week helped to pressure the market early. For February, beef exports totaled 122.7 million pounds as compared with 128.6 million in January and 115.4 million in February of 2008. This news helped provide some underlying support as well. The estimated cattle slaughter came in at 113,000 head yesterday. This is up from 112,000 last week but down from 126,000 a year ago as this time. Boxed beef cutout values were up $1.15 at mid-session yesterday and closed $1.41 higher at $140.44. This was up from $136.79 a week ago. There were 29 new tenders and 7 re-tenders for April cattle this morning which might be seen as a limiting factor for the bulls. Cash traded $1.00 higher at $86.00 last week but some traders were disappointed with the trade. A potential higher showlist and weak packer margins would suggests a steady tone this week.
TODAY’S GUIDANCE: The short-term technical readings remain overbought but the turn up in beef prices is helping support the upside break-out and funds have been aggressive buyers. A seasonal turn up in demand is close at hand.
TODAY’S MARKET IDEAS: Buying support for June cattle comes in at 83.82 and 83.55 with 86.22 and 87.90 as upside targets.
