In a nutshell, bottom of market has been reached we believe. Packers are now trying to get more money for trim. They wont have much upward potential this winter on trim, much more potential for gains on boxed beef. There is an export threat around Chinese new year that will likely cause increased pricing and lower availability. There isn't a mass shortage of trim like there was this time last year though. Cattle weights are still a little heavy. Feed Rations are good so far. Production is good so far.
Really I think feed cost is the biggest factor in pricing this winter. Some would also say heightened retail demand and suffering Foodservice demand but I don’t know that’s all technical, feed cost is fundamental. 30 Day outlook for 85% trim I don’t think Packers are going to get a whole lot more than maybe $1.69/Lb give or take a few pennies. Large purchases were made at the market bottom last week. I think those who needed product in their freezers stocked up. For 90% trim $1.99/LB seems to be a comfortable number. 50% has been chaotic recently. There was clearly some canceled formula sales that got put up for bid on the open market that caused a drop into the mid and low $.30’s a couple weeks in a row. I’d say fatty trim will rebound to right around $.50/LB this winter could be more if the winters in the Dakotas are really harsh. If China keeps putting pressure on feed costs and Brazil has a crappy grain harvest, prices on all beef items will shoot back up after December but will really hit Feeder Futures hard which would result in higher cattle prices in May and June. Probably an easy $2.10 as the base for 90% in late winter I’d say ceiling could be $2.25 if ground beef demand picks up after people spend all their money over Christmas.