The Beef Read: Cash trade continues

This week’s negotiated cash trade got started yesterday at $108 in Texas and Kansas and $170 to $172 north, but it is still dragging on today. Western Nebraska, where numbers are tight, is priced at $110, 0.50 higher than last week’s $109.50 while in the east, more cattle are trading at $172.

With the fed kill just barely under 520k head two weeks ago and over 510k last week and this week, the packer need to replenish live inventories often is high. If this week’s negotiated volume falls short of 100k, then packers may have to pay up next week- or pull very hard on contracts and formulas- or both. With the seasonal cutout bottom established and the rally in the rib primal underway, packer margins are set to hold above $100 per head for the next couple of months at least. There is every reason to keep plants running, with only the performance of needed maintenance a reason to cut production.

The mostly steady cash trade thus far has buoyed spot Oct LC and given the bull spreads another lease on life today, though Oct/Feb is still over $9 a $1 worse off than it was Monday of this week- a clear example of how the October was trounced mid-week. Oct LC has a long way to go to prove itself, as it will likely close lower on the week today.

Source: The Beef Read