CATTLE: Steer Weights Remain Low and Beef Production Tightening

Steer weights remain low and beef production tightening April cattle reached a new contract high and the break-out leaves 167.37 as next upside target. The market continues to find support from tightening supply with beef production last week at just 518 million pounds, down 6.3% from last year. Packer profit margins remain very strong and average weights remain well below normal which suggests that producers are current with marketings and this is a positive force. The USDA boxed beef cutout was up $1.21 at mid-session yesterday and closed 88 cents higher at $290.20. This was up from $288.34 the previous week and was the highest it had been since January 31, 2022. Cash live cattle trade was quiet yesterday with no trades reported. The 5-area weighted average steer price last week was 165.02, up from 163.72 the previous week and 140.61 a year ago.

The USDA estimated cattle slaughter came in at 125,000 head yesterday. This was up from 124,000 last week and 122,000 a year ago. USDA attache from China sees imports growing in 2023. China's decision to end its zero-COVID policy restrictions is expected to improve demand for both pork and beef products in 2023. However, Brazil's decision to suspend beef exports to China at the end of February following a suspected mad cow case could impact supply as alternative origin suppliers may not fully bridge the potential supply gap in 2023. Pork production and imports, and beef production are all forecast to grow in 2023.

Today’s Market Ideas

The longer-term fundamentals are still supportive as beef production continues to tighten and weights remain much lower than normal. April cattle support is at 165.45, with 167.37 as next target. August cattle support is at 159.57, with 161.72 as next upside target.