** AgResource Daily Cattle Analysis: Cattle futures closed with strong gains on Monday as the market adjusted to last week’s sharply higher cash trade. October cattle are trading without price limits and were $4.20 higher while December traded to, but closed nearly $.50 under the daily $3 limit. All months from December forward, traded to and closed at new contract highs.
The weekly Grading Percent report on Monday, with data for the week ending Oct 20th, showed a slight decline in the percent of high quality graded steers and heifers. 78.7% of the week’s slaughter was rated as choice or higher, which was the lowest since July, but still above last year and a record seasonal level. There are rumors that a large number of beef plants have been over grading the number of choice carcasses since June due to faulty digital equipment, and that realization is partially why cash trade jumped $8-9 higher last week. The USDA has yet to confirm, but if correct would reduce the percentage of high quality beef.
Strong 4th quarter demand has driven cattle prices to extreme levels (relative to supply), while we see CME futures for the 1st quarter as nearly valued. Rallies in February to $130 or better are expected to struggle.
** South American Weather Pattern Discussion: A generally favorable forecast is offered for Brazil for the next 2 weeks. The forecast is wet for N and C Brazil with heavy rains to drop as far east as Bahia. Heavy rains will also to produce some low lying flooding in Parana and Santa Caterina where recent rains have saturated soils. Thankfully, RGDS starts a drying out process which should continue during much of November.
The jet stream is displaced further south and a rich monsoonal flow will benefit N and C Brazil crops with meaningful rain.
A drier weather profile is starting to emerge for Argentina with just one chance of rain in the next 2 weeks that will favor eastern crop areas. Cordoba will be short changed as evidenced in the EU 10 day rainfall forecast to the left. Cooler than normal temps across much of Argentina and the southern half of Brazil prevail during the 6-12 day period. There is no evidence of any concerning high pressure Ridge at this time.
