Additional beef supply starting to showAdditional beef supply starting to show
Cattle prices see slight bump last week.
October 7, 2024

By Trey Freeman, Ever.Ag
Early week concerns last week about the impact of the East/Gulf coast port strike evaporated as the International Longshoremen’s Association union agreed to return to work after receiving the promise of a 62% wage increase over the next six years. While other contract items still require negotiation, both sides said they would seek to iron out the terms between now and January 15. That’s a relief for beef exports, as estimates suggest more than 1 million metric tons of meat move out of East Coast gateways each year.
Meanwhile, fed cash cattle prices unfolded last week at $186.00/cwt. in the South and $187.00-$188.00/cwt. in the North, both regions up $1.00/cwt from the previous week. In the North, trade unfolded at $296.00/cwt. on a dressed basis, $2.00/cwt. higher than the previous week.
We have seen 600,000+ kills per week for multiple weeks in a row. Match this with record-high steer weights that continue to climb along seasonal lines, and additional supply is starting to show in some of the cuts. For instance, the weekly average 50s trim market has fallen $1.23/lb., or 58%, since mid-August. Middle meats should provide seasonal support going into the holiday season.
Packers are likely to consider reducing kills to help support a sliding boxed beef market, helping to slow the bleed in their already negative margins as cash prices for fed cattle have simultaneously risen for multiple weeks now.
The latest weekly slaughter data revealed dressed steer weights at a record high 948 pounds. This is 30 pounds above a year ago and 36 pounds higher than the five-year average. Heifer weights were reported at 852 pounds, twenty pounds above a year ago and 20 pounds higher than the five-year average. Heavier weights continue to offset the smaller slaughter numbers. Fed cattle slaughter through the first 38 weeks is down 168,100 head, or 0.91% compared to the same timeframe in 2023. On the other hand, fed beef production is up 1.64%.
October and December live cattle futures each finished the week at $187.00/cwt., $3.25/cwt. and $2.525/cwt. higher than the previous week, respectively. This marks four consecutive weeks of gains in live cattle futures. February and April contracts continue to trade at a seasonally narrow premium to nearby contracts. The spread is approaching levels not seen this time of year since 2014-2015 and 2016-2017.
The latest CFTC Commitments of Traders report last week showed managed money adding another 10,878 contracts to their net long position in live cattle. Over the course of two weeks, managed money has added a total of 24,111 contracts to their net-long position. They are now net-long 67,888 contracts. This is the largest addition of net-longs for managed money over a two-week period since mid-February.
November feeder cattle futures also marked their fourth consecutive week of gains, finishing $3.575/cwt. higher at $249.275/cwt. November is bumping up against stiff resistance at $250.00/cwt. Further out feeder cattle contracts showed the most strength last week, with January through May contracts gaining over $4.00/cwt. for the week. The March contract showed the largest gain of $4.80/cwt.
The risk of loss trading commodity futures and options can be substantial. Investors should carefully consider the inherent risks in light of their financial condition. The information contained herein has been obtained from sources to be reliable, however, no independent verification has been made. The information contained herein is strictly the opinion of its author and not necessarily of Ever.Ag and is intended to be a solicitation. Past performance is not indicative of future results.
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