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The market appears to have priced-in much of the poor demand news of recent months but continued weakness in beef prices despite a tighter supply and fears that we will see “extra” meat to absorb this summer in the form of liquidation of hogs has helped keep a negative tone for the market. August cattle probed lower on Friday trading down to Wednesday’s lows at one point, but managed to hold support and rally back towards unchanged on the day late in the session to settle only slightly lower. Some late in the week short covering may have lifted the market after a steep 3-day sell-off, but volume was low as traders looked ahead to the quarterly Hogs & Pigs report for some direction. Boxed beef cutout values were 60 cents lower in the morning which may have contributed to the early selling. Cash cattle traded at $82.00 in Texas on the day which was steady with the trade the previous week and up slightly from some trade earlier last week. Reports of hot weather causing cattle deaths in Nebraska last week as well as tight feedlot supplies helped to provide some support but the weather has moderated this week. The Commitment-of-Traders reports, released Friday, showed a massive short-covering event for the week ending June 23rd. Trend-following funds reduced their net short position by 11,392 contracts for the week to a net short of 7,077. Non-reportable traders (small specs and some producers) increased their net short position to over 20,000 contracts. Index funds were light net buyers. The estimated cattle slaughter came in at 130,000 head Friday and 27,000 head for Saturday. This was a little higher than expected and suggests good demand from the packer. Cumulative slaughter for last week reached 673,000 head, down from 675,000 last week at this time and down from 713,000 a year ago. Beef production was down 6.1% from last year. Boxed beef cutout values were down 60 cents at mid-session Friday and closed 76 cents lower at $138.93. This was up from $139.59 a week ago and down from $164.83 last year at this date. Last year, beef prices hit a peak for the year on July 10th at $173.80.
TODAY’S GUIDANCE: The market seems too cheap but demand remains very week. While beef production was down 6% from a year-ago last week, beef prices are still at $138.93 which is down from $164.83 last year at this time.
