Extreme heat across the eastern 2/3 of the US is likely hurting beef demand at what should be a one of the highest consuming periods of the year. This could pressure the closer-in contracts of cattle, even with concerns that the heat is hindering animal weight gain. The positive trade in other commodity markets and a jump in the stock market provided a bullish tilt to cattle futures for a moderately higher close on Tuesday, and further gains in the stock market overnight following a Chinese rate cut could lend support as well, but our concern is that reduced demand due to the heat could dominate the trade today. Boxed beef cutout values were down 89 cents at mid-session on Tuesday and closed $1.41 lower at $193.22. This was down from $197.74 the prior week and was the lowest level for the cutout since May 18th. Traders await cash live cattle activity this week after $116.00 trade last week. A lower showlist might normally support the cash market, but traders are concerned about packer demand. The August contract's premium to last week's cash trade may also be seen as a short-term negative factor. The estimated cattle slaughter came in at 129,000 head on Tuesday. This brings the total for the week so far to 255,000 head, down from 257,000 for the same period last week. The longer term outlook is for tighter supply into the fall, but near term demand concerns due to the hot weather could keep a lid on the market for now. Fourth quarter beef production is expected to come in 9.2% below last year according to the recent supply/demand update from the USDA. One positive is that restocking after the power outages on the East Coast could become a positive force for the beef market by next week.
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