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CME: Weak Packer Margins Continue to Limit Rallies, Friday

25 February 2013

US - Live and feeder cattle futures saw a round of short-covering today, but still posted losses for the week, write market analysts at Profarmer.

Concerns that federal meat inspectors will be off the job beginning March 1 due to potential furloughs raised concerns about demand. Futures should see bull spreading this week as Friday's Cattle on Feed Report showed On Feed at 94 per cent, Placements at 102 per cent and Marketings at 106 per cent of year-ago levels.

The feedlot inventory continues to shrink, while feedlots are doing a very good job of marketing their animals.

April cattle closed 40 higher on the session but closed 222 points lower for the week. The market challenged the highs from yesterday but failed to move above as traders wait for a better signal for the cash market or news from the report this afternoon.

Strong exports helped to support with weekly beef export sales for the week ending February 14th coming in at 22,200 metric tonnes, compared with the prior 4-week average of 10,800. Cumulative sales for 2013 have reached 185,700 metric tonnes, down -4.9 per cent from last year.

Traders positioned ahead of the USDA Cattle-on-Feed report for release after the close. Traders see January placements just slightly higher from a year-ago which would be the first increase in the past eight months. However, January marketings are expected to be up nearly 5 per cent from last year.

This would leave feedlot supply on February 1st down about 6.2 per cent from last year. Weights are already on the decline and with 18 inches of snow in Kansas and some additional weekend moisture for in the plains, traders see further declines in weights into late this month.

Active volume of sales in the beef market last week has some traders hopeful that demand is picking up but weak cash markets, weak packer margins and speculative selling continues to limit the market on rallies.

Boxed-beef cut-out values at mid-session today reached $182.74, up $.39 from Thursday but down from $183.53 the week before. Slaughter came in slightly below expectations at 103,000 head.

Daily Livestock Report - Copyright © 2008 CME. All rights reserved.

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