Fed cattle futures closed last week on a firm note, with the August contract up 140 points and the Jun-Aug spread now at the lowest point since last November. While there is a lot of uncertainty about the summer beef market, the sharp rally in both beef and cattle prices so far has forced market participants to rethink the outlook through the entire futures curve. Robust beef demand going into Memorial Day has made it possible for packers to push up spot beef prices. We estimate that steer and heifer slaughter last week was 1% higher than a year ago but the decline in carcass weights implies beef pounds coming to market likely declined year over year. The point of debate going forward will be the rate at which retailers respond to the sharp run-up in beef prices and opt to feature other proteins at the expense of beef. Hog slaughter for the week was 2.249 million head, 6.3% higher than the previous year. Since the first week of March weekly hog slaughter has averaged 5% above year ago levels, in line with the levels implied by the March ‘Hogs and Pigs’ Report. For now futures market participants are focusing on all the good news and some producers will likely take advantage of the rally to hedge their Q4 supplies.
Jun ’17 Live Cattle Daily Chart