In Cattle Markets by The Beef & Cassandra Fish03/24/2020
By Cassie Fish, http://cassandrafish.com
CME cattle futures are demonstrating daily its weaknesses in the contract during a time of crisis. Computerized trading along with a lack of buying thanks to rampant fear, drove futures prices into the dirt for weeks, until a 3 standard deviation cash price move was priced. Today, Apr LC is $106.15, still below the lowest 5-area average price paid in 2020. That price, $108.84 was paid 2 weeks ago.
Over 6k contracts are bid in Apr LC, which eventually will make its way closer to cash prices, maybe back to the 100-day moving average near $120. That might be a bold statement to make but consider that boxed beef cutout values will continue strong for weeks, not days, as the packing industry runs full throttle in order to resupply grocers nationwide. Nationwide, all grocers simply cannot get fully restocked on all SKUs by this weekend or even next weekend.
Some want to argue consumers have put meat in the freezer and the buying frenzy will stop and while that is true in some cases, many Americans don’t own a separate freezer. Many people are eating three meals a day at home now.
Just how big was last week’s scramble? Take a look below at the spot beef sales volume spiking up to 3,000 loads in one week. This is on top of the increase in formula sales, which is how large retailers receive consistent supply and price.
The increase in volume and price is a boom to packer margins and sales revenues which widened out to levels not seen since the Finney County Tyson Fresh Meats fire and are record for any March in history. This week’s slaughter level will be 660k to possibly as high as 668k head, though one plant lost a shift yesterday. A 660k kill for this week in March would be the largest since 2000. Incredible.
Major packers in the north are bidding $185 dressed and one regional is bidding $188. Given futures and cutout values, those bids are largely being ignored though a few cattle did trade yesterday. Regional fed cattle auctions yesterday and today saw tops $119 to $121.
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