Along with the rest of the market, meat markets have been exceptionally volatile this week. April cattle closed 300 points up off the limit yesterday as the market is responding to a surge higher in beef prices over the past couple days. An interesting aspect of this is that there is a surge in packer margins which is trying to fill the retail pipeline which, for at least the short-term, is a bullish force. Beef supply is high right now and add that to the fact that cattle weights are up in a time when usually they are smaller, suggesting that this could be a sign that cattle is already backing up in the country. We may see some temporary pops here in the short-term, but I do not see any reason to stay long this market.

Average dressed steer weights for the week ending March 7th came in at 903 pounds, up from 897 the previous week and 871 a year ago. The 5-year average weekly weight for that week is 879.4. This is a bearish development. The USDA boxed beef cutout was up $3.27 at mid-session yesterday and closed $2.63 higher at $249.87. This was up from $206.01 the previous week and $228.67 a year ago. This is the highest the cutout has been since June 2017. U.S. beef export sales for the week ending March 12 came in at 21,188 tonnes, up from 17,668 the previous week and the highest since January 23. Cumulative sales for 2020 have reached 337,282 tonnes, up 17% from last year’s pace and the highest on record going back to at least 2002. The largest buyers this week were South Korea at 7,343 tonnes, followed by Japan at 4,007, Canada at 2,675 and Taiwan at 2,348. China bought 8 tonnes after buying 694 tonnes the previous week. The countries with the largest commitments for 2020 are Japan at 100,146 tonnes (roughly 30% of all U.S. sales), South Korea at 81,159, and Hong Kong at 47,901.

The USDA estimated cattle slaughter came in at 115,000 head yesterday. This brings the total for the week so far to 474,000 head, down from 485,000 last week and down from 480,000 a year ago. For the cattle on feed report, traders see placements for the month of February at just 92.4% of last year with a range of 89.0-97.1. Marketings for February are expected at 105.6% of last year. This would leave On Feed supply for March 1 at 100.3% of last year (range 99.7-101).

Live Cattle Jun ’20 Daily Chart

Peter McGinn

Peter graduated from DePaul University with a degree in Economics. Peter started his career with an IB at the Chicago Board of Trade. He then moved on to TradeStation Securities for a time before starting as a Market Strategist at RJO Futures in 2018.