** AgResource Daily Cattle Analysis: Cattle futures marked strong gains on Wednesday, and a higher outlook is offered for early trading this morning. A higher start to the morning on Wednesday was sold, but the market surged to limit gains as cash markets turned active. Aug-Dec finished with limit gains, and synthetically August was another $.475 higher and October up $.375.
Early sales at the Fed Cattle Exchange ranged from $117-118.75, while negotiated trade got underway late morning with cattle selling $2-3 higher at $120. The week’s cash business was far better than expected, with many looking for no better than steady, with $1-2 lower likely. Beef cutouts were again sharply lower, down $2.55 on choice and $1.78 on select on light to moderate demand and heavy offerings.
With August cattle now $5 over last week’s low, we are neutral on rallies. Based on current 3rd quarter supply projections, while rallies will struggle against $119-121. The July WASDE raised the 4th quarter beef production forecast by 170 Mil Lbs. Note in the chart that this will be the 3rd consecutive year that 4th quarter output exceeds 3rd quarter. We think producers should be ready for 4th quarter hedges on rallies back towards contract highs
** US Weather Pattern Discussion: The US & EU models are in only fair agreement this AM. The EU model has reduced the amplitude and retrograded the mean position of a high pressure Ridge west. This implies less heat for the Midwest, but still not a lot of rain for the Plains, Delta and the West Central Midwest. ARC notes that the GFS model holds more Ridge across the South Central Ridge next week and is far warmer. The EU Ensemble model is a good blend of the EU operational and the GFS operational and is our model of choice.
Unfortunately, there is just not a lot of rain for the N Plains or the Plains over the next 10 days. This area will continue to endure a deepening drought. Any rains will be centered on the Great Lakes as storm systems ride over the top of the Intermountain West and Plains high pressure Ridge. The best rains look to fall across E MN, WI, MI and portions of NE IL, N IN and OH. The EU model 10 day rainfall map reflects this rainfall trend. High temps next week look to range from the upper 80’s to the upper 90’s, but the forecasts are a few degrees cooler than what was offered yesterday.
The forecast is cooler and less threatening to silking corn. However, its still too dry over 45% of the Central US.
