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When we see a period of uncertain slaughter ahead of a storm, beef prices would typically push a bit higher as the pipeline quickens so end users have enough supply on hand in case of slow production. The opposite was true ahead of this storm system as sellers were active in beef and cash markets but buyers pushed to the sidelines. Restaurant demand remains very slow and the traditional buying for holiday parties is down sharply from recent years. Consumers appear to be tightening their belts and paying down debt instead of celebrating and this is having a significant impact on beef demand. Meat demand has shifted to pork and poultry as movement in these areas has been active. Cash cattle traded at $$78-$79 in Nebraska from $80-81 last week and Kansas cattle traded $1.00-$2.00 lower to $80.00 and were bid at $79.00 late in the day which was seen as a bearish development. Talk that Kansas cattle sales included two-week delivery and that some of the cattle would be shipped to Texas for processing was also seen as a negative development. Texas cattle traded $80.00, down $3.00 from last week. February cattle closed sharply lower on the session and moved to new lows and briefly under 82.00 yesterday as compared with 85.82 as the December high. Continued weakness in beef prices and lower trade in the cash cattle market sparked another round of long liquidation selling yesterday. Many traders thought that the weather in the plains might spark some better demand for live cattle and maybe some higher demand to move beef ahead of the storm. However, talk of weaker restaurant demand and selling in most other commodity markets helped pressure. The estimated cattle slaughter came in at just 97,000 head yesterday as plants were closed or on shorter shifts. This brings the total for the week so far to 334,000 head, down from 369,000 last week at this time and down from 356,000 a year ago. Boxed beef cutout values were down $1.21 at mid-session yesterday and closed $1.22 lower at $135.37. This was down from $139.59 a week ago and the lowest beef price since October 12th.
TODAY’S GUIDANCE: The market is searching for a low enough level to entice new demand but demand news continues to worsen and speculators were still holding a net long position in the last COT report which leaves the door open for long liquidation selling. With cash at $80.00 or weaker, February still seems to have some downside potential. Resistance comes in at 82.75 with 81.55 and 81.00 as next support.
