August Live Cattle surged to a new high for the recent up move, trading to 177.25 and settling at a new all-time high settlement for the lead contract at 177.175. The low was at 173.75. The USDA shocked traders by finding more corn acres planted than analysts’ estimates which sent corn spiraling to its May lows for the December contract. This lit a fire in the Feeder Cattle market, which helped propel the fats to approach its all-time high (lead contract) which was established in early June at 178.10. The expiring June spot contract settled at 181.50, which is the all-time high for an expiring contract. The negotiated cash cattle market has traded lightly so far this week as packers attempted to buy cattle at lower prices and weren’t too successful. They bought some at lower money early in the week but have needed to increase bids to get more bought as producers were backing off as the week progressed. This should keep their averages down from last week, but at the expense of not purchasing a lot of inventory. Next week is a short slaughter week, but at the same time packers will have a tight window to buy cattle for a full slaughter week the following week. Boxed Beef has fallen from its high but is still at extremely high levels. Maybe they are expecting a lousy July 4th holiday and with it over, are looking for a cash pullback as we get into the summer season. Producers are looking (in my opinion) at a strong June expiration and a short supply of market ready cattle coming in the second half of the year and are betting packers will have to chase to get inventory purchased. The strong close in the August contract puts 178.10 in traders cross-hairs. A pull-back from settlement could see a test of support at 175.95. Support then comes in at 174.425.
Boxed beef cutouts were lower as choice cutouts dipped 0.33 to 327.72 and select fell 3.55 to 293.63. The choice/ select spread widened and is at 34.09 and the load count was 98.
Friday’s estimated slaughter is 123,000, which is above last week’s 120,000 and last year’s 122,000. Saturday slaughter is expected to be 19,000, which is below last week’s 26,000 and above last year’s 17,000. The estimated total for the week (so far) is 644,000, which is below last week’s 649,000 and above last year’s 641,000.
The USDA report LM_Ct131 states: So far for Friday in all major feeding regions negotiated cash trading has been slow with light to moderate demand. In the Texas Panhandle, a few, live purchases traded at 179.00. In Nebraska, a few, dressed purchases traded at 290.00. In the Western Cornbelt, a few, live purchases traded from 182.00-183.00. However, not enough purchases in any of these regions for a full market trend. In Kansas the last reported market was on Tuesday with live purchases at 178.00. Last week in the Texas Panhandle live purchases traded at 180.00. For the prior week in Nebraska live and dressed purchases traded from 182.00-185.00 and at 290.00, respectively. For the previous week in the Western Cornbelt live and dressed purchases traded from 184.00-185.00 and at 290.00, respectively.
The USDA is indicating cash trades for live cattle from 176.00 – 185.00 and from 280.00 – 290.00 on a dressed basis (so far).
August Feeder Cattle surged after a bearish USDA report sent corn in a tailspin. Excited traders took price to an all-time high and all-time high close for the lead contract, with the highs at 248.075 and 247.57 respectively. The low was at 240.40. The Feeder Cattle index has surged in its own right this week as producers have bid up cash feeders in order to get product in feedlots. These are some very expensive cattle. With corn futures breaking down over the past seven days, to say producers are enthusiastic may be an understatement. These are some very expensive cattle… Will cash corn join in the collapse. Better hope for continued rain. As of now producers tell me they can’t get corn and expect basis to widen in the near term. So, better hope we get rain in the areas that need it. A breakdown below from settlement could see price test support at 245.75.
The Feeder Cattle Index increased and is at 232.75 as of 6/29/2023.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursdays (except holiday weeks) and our next webinar will be on Thursday, July 06, 2023 at 3:00 pm. It is free for anyone who wants to sign up and the link for sign up is below. If you cannot attend live a recording will be sent to your email upon completion of the webinar.
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Ben DiCostanzo
Senior Market Strategist
Walsh Trading, Inc.
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