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Corrective breaks into the holiday season led by long liquidation selling in livestock futures or in commodity futures in general could be a good buying opportunity for cattle. The market is expected to see a string of several months in a row starting with November in which placements onto feedlots are slow. This could cause a tightening of supply; especially into the spring and summer months. Demand has been the primary bearish force for the market but with more and more signs that the economy is recovering, beef demand is expected to stabilize soon and begin improving into 2010. Ideas that placements during November were slow and that this could support less feedlot cattle in April and May helped support the spring contract months this week. For the USDA report for release after the close today, traders see placements down as much as 13% with most estimates near an 8% drop and some estimates looking for very little drop at all. Marketings are mostly expected to be up 1-3%. This could leave on-feed supply higher than last year for the third month in a row. However, with a tighter calf crop into next year and a low placement trend, the supply outlook appears supportive into 2010. In fact, the USDA projects beef production for the 1st quarter to be down 1.8% from last year. Production in the second quarter is expected to be down just slightly and then a drop of 2.2% from this year for the third quarter of 2010. February cattle closed lower with a quiet inside trading session yesterday as weakness in hogs and other commodity markets sparked some light long liquidation selling. Demand concerns persist and the break in the stock market added to the negative tone. Weekly US beef export sales for the week ending December 10th came in at just 4,500 metric tonnes as compared with the prior 4-week average of 7,800 tonnes. This is the lowest weekly total since the week of July 2nd. Cumulative sales for the year came in at 490,600 tonnes vs. 522,600 last year by this date and 788,300 by this date in 2003. The estimated cattle slaughter came in at 124,000 head yesterday. This brings the total for the week so far to 489,000 head, up from 459,000 last week at this time and up from 466,000 a year ago. Boxed beef cutout values were up 49 cents at mid-session yesterday and closed 17 cents lower at $138.77. This was up from $134.79 a week ago. Average dressed steer weights for the week ending December 5th came in at 853 pounds, up from 852 the previous week and down.35% from a year ago. The 5-year average weekly weight for that week is 841.8. Beef production for the same week came in at 500.4 million pounds, down 3% over year ago.
TODAY’S GUIDANCE: February cattle buying support comes in at 84.02 and 83.60 with 85.60 and 86.60 as next upside targets. Look for a supportive report.
