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Bearish expectations for this afternoon’s Cattle on Feed report appear to be priced into the market. We may see some choppy action today ahead of the report. The cattle market inched higher in quiet trade yesterday. Ideas that the market is oversold and has already absorbed the outlook for a negative USDA report lent support. The market exhibited a lack of aggressive speculative selling, even with the stock market down sharply and weak beef prices, and this helped spark some short-covering. US beef export sales for the week ending November 12th came in at 9,000 metric tonnes, which was near the 4-week average. Cumulative sales for the year have reached 463,900 tonnes, down 7.7% from last year. In 2003 (before Mad Cow), cumulative sales as of this week were 761,900 metric tonnes. For this afternoon’s Cattle-on-Feed report, the trade is looking for on feed supplies to be up 1% to 2% from a year ago, as slow marketings (expected to be down around 3%) and higher placements (expected to be mostly up 2-3%) should pull supply higher. Placements are normally heaviest in October, and last year’s number was down sharply from the previous year, so it won’t take much to see a jump this year. Some traders have commented that a slight drop in marketings is to be expected because this year October had one fewer slaughter day than last year. The estimated cattle slaughter came in at 120,000 head yesterday which was below trade expectations, and this suggests weak packer demand. This brings the total for the week so far to 489,000 head, up from 477,000 last week at this time but down from 491,000 a year ago. Boxed beef cutout values were down 86 cents at mid-session yesterday and closed $1.14 lower at $139.61. This was up from $139.31 a week ago but was the lowest since November 13th. Average dressed steer weights for the week ending November 7th came in at 847 pounds, down from 851 the previous week and down 1.6% from a year ago. The 5-year average weekly weight for that week is 846.6. Weights were at a record high just 5 weeks ago and another sharp decline for this week suggests that producers are getting much more current with marketings.
TODAY’S GUIDANCE: Near term cash fundamental news is mixed with a slightly negative bias as the weak beef market remains a demand concern. Supply, however is tightening to provide some offset. Look for the choppy to sideways trade to continue into next week as the demand news is weak but the market is oversold.
TODAY’S MARKET IDEAS: February cattle support comes in at 84.82 and 84.55 with 86.35 and 86.77 as resistance.
