Market Remains Largely Supply-Driven

11/3/2012 7:00 AM

The live cattle and wholesale beef markets remain supply-driven as consumer demand for beef remains affected by record high prices.

Cash live cattle prices have rallied this fall as market-ready supplies remain tight except in the eastern Corn Belt.

A larger front-end supply of cattle than last year has so far failed to put a dent in prices. But this is likely to change in November.

Cash prices last week were barely steady with the week before at $127 per hundredweight. They have likely put in their seasonal highs and might decline $5 per hundredweight or more as the number of market-ready cattle grows, analysts say.

In turn, packers continue to run reduced fed steer and heifer slaughter in an attempt to keep boxed beef prices as high as possible and offset high live cattle costs.

The choice cutout value averaged $193.52 the week before last and last week advanced beyond $199 to its highest daily level since October 2003.

It began the month at $189.19. But the October advance was due to reduced kills and did not reflect an improvement in overall beef demand, analysts said.

The choice cutout hit its historical resistance level last week and looks set to decline at least the next two weeks, they say.

The latest Cattle on Feed report was positive on numbers and placements, and neutral to slightly negative on marketings. But that had little impact on futures prices early last week.

As expected, September placements were down 18.8 percent from last year at just over 2 million head, and the lowest placements for the month since the series began in 1996.

September marketings at nearly 1.6 million head were 88.1 percent of last year. This reflected two less slaughter days than last year, but the percentage was 1.7 percent lower than forecast.

The report revealed an Oct 1 Cattle on Feed total of nearly 10.99 million head, 97.4 percent of a year ago. This was 0.4 percent lower than forecast. But it was still the second highest Oct 1 COF total since 2006.

The futures market was essentially flat the first three days of last week, although contracts in the back months declined Thursday.

Pennsylvania Center for Beef Excellence Inc. with information from the CME Report, Cattle Buyers Weekly and other resources. For more information call 717-705-1689.

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