The cattle markets were able to follow-through on Wednesday’s sharp rally, with live cattle trading $3+ higher by midday yesterday and closing $1.60-1.90 higher in the nearbys. We’ve yet to see any real cash cattle trade develop, with packers showing $131 bids vs $135+ producer offers. Historical average basis for this time of year has been between $0 and -$1, so nearby Dec futures at $133 would imply the market is pricing in a $132-133 trade. However, not all is well on the beef front, where the choice and select cutout indexes were smacked for $3-4 yesterday and are off $8-9 in this past week. Beef weakness of that size was not expected and probably sets the stage for futures to start lower this morning. Note week ending Oct 31 slaughter data released yesterday show the average carcass down 5 lbs vs the prior week (steers down 7; heifers down 1). Though the average carcass remains a sharp 18 lbs above last year, its likely we have now hit our seasonal peak with weights trending sideways through the end of the year and seasonally lower in to the spring.
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