The market has seen an impressive three-day surge higher with
a much more positive tilt to outside market forces and ideas that
the severe heat in the central plains (all-time record highs
posted for Dodge City Kansas this weekend) will dent supply.
However, while lighter weights could help, traders now see very
hot weather on the east Coast beginning this past weekend as a
negative force for consumer demand. At 95-100 degrees, consumers
tend to stay indoors and consume less beef. Through Tuesday, fund
traders were in a long liquidation selling mode but this may have
shifted the other way with a more positive tone for the economy.
However, high grain prices may help keep short-term supply ample
and the surge higher last week leaves August futures at a
significant premium to the cash market. Boxed beef cutout values
were down $1.43 at mid-session Friday and closed $1.46 lower at
$194.66. This was down from $196.63 the prior week and is the
lowest beef market since May 25th. August cattle closed sharply
higher on the session Friday as outside market forces seemed to
be the driving force. Fund traders were active buyers of most
commodity markets as macro-economic fears subsided. The rally
pushed the market up to the highest level since June 13th. Cash
cattle trade was seen as a positive influence as Kansas cattle
traded at $116.00, which helped give the market a boost. Packer
margins are in the black and if beef prices do not fall too much
this week, traders are hopeful that cash can stay steady or push
a bit higher. A much more positive tilt to commodity markets
helped to support with a surge higher in the stock market and a
sharp break in the US dollar. The estimated cattle slaughter came
in at 123,000 head Friday and 24,000 head for Saturday. This
brought the total for last week to 653,000 head, up from 649,000
the previous week but down from 670,000 a year ago. The
Commitments of Traders reports as of June 26th showed
non-commercial traders were net long 49,205 contracts, a decrease
of 7,409 for the week and the long liquidation selling trend is
seen as negative. Non-commercial and nonreportable traders
combined held a net long of 24,628 contracts, down 4,332.
Commodity Index traders held a net long of 115,896 contracts,
down 804.