Key Takeaways
- • Hales Trading reports that December live cattle futures reached a high of $232.45, completing a $21 rally and moving to a premium to cash, with technical indicators deep in overbought territory and the firm expecting a downside correction.
- • The choice cutout closed at $372.59 and select at $355.34 on the day, with choice $3.91 below the same day last week and $5.29 below a year earlier.
- • The 112A 3 ribeye closed at $1,554.38, below its record high of $1,644.21 posted Oct. 7, but well above $1,376.52 a year ago and $1,211.42 in 2024.
- • 90% lean cow beef has fallen below its year low set in early January, a decline Hales attributes to weakness in ground beef demand not reflected in market pricing.
- • Packers are expected to cut slaughter this week to 533,000–543,000 head, versus a projected 554,000 weekly pace, to limit further cutout erosion.
Summary
Hales Trading Co. warns in its cattle letter that record-high rib prices are masking a more serious problem for beef packers. The ribeye (112A 3) closed at $1,554.38, below the $1,644.21 high posted Oct. 7, but still far above year-ago and 2024 levels of $1,376.52 and $1,211.42, respectively. Hales says any weakness in the rib would translate into a significantly lower cutout, and that the complex is already under pressure.
The broader beef cutout weakened through the session. Choice closed $0.71 lower at $372.59 and select $6.20 lower at $355.34, according to the firm's afternoon quotes. Choice was $3.91 below the prior Wednesday and $5.29 below the same day last year. Hales notes that 90% lean cow beef has dropped below its low for the year, set on the first business day of January, a move it says did not occur in 2024 or 2025. With cow slaughter not rising significantly, Hales interprets the decline as evidence of softening ground beef demand that the market has not yet fully priced. The 81% ground beef price from fed steers and heifers, at $345.16, sits below its January starting level but slightly under last year's $345.58 and well above 2024's $308.78.
On supply, Hales estimates today's slaughter at 110,000 head and week-to-date slaughter at 327,000, versus 326,000 last week, putting the weekly pace at about 554,000 head. The firm says it has heard there is too much beef in the pipeline and expects packers to trim slaughter to a 533,000–543,000 head range to reduce cutout declines. Cow slaughter may have risen 7,000–8,000 head week over week, which could ease pressure on some cuts while adding downside risk to 90% lean beef and items such as peeled fed-cattle knuckles.
In futures, December live cattle reached $232.45, only 27 points below a 61.8% retracement level Hales had flagged earlier in the week. Hales says volume faded once the rally reached the high-$18,000 area, and that the advance has pushed December from a discount to cash to a premium. Technical indicators are overbought without confirmed sell signals, and the firm looks for a corrective decline in cattle futures. In feeders, March contracts have rallied more than $40 since the early-September low, as corn fell more than $1 per bushel. Hales argues a corn bottom could set up a grain rally that limits feeder upside. March corn hit $5.64 on Sept. 2 and settled at $4.77¾ after a session low of $4.68¾, and the firm flags potentially bullish South American weather under El Niño conditions that it believes is not yet priced into corn. It suggests cattle-on-feed operators consider options or futures to hedge 2027 feed costs.
The broader beef cutout weakened through the session. Choice closed $0.71 lower at $372.59 and select $6.20 lower at $355.34, according to the firm's afternoon quotes. Choice was $3.91 below the prior Wednesday and $5.29 below the same day last year. Hales notes that 90% lean cow beef has dropped below its low for the year, set on the first business day of January, a move it says did not occur in 2024 or 2025. With cow slaughter not rising significantly, Hales interprets the decline as evidence of softening ground beef demand that the market has not yet fully priced. The 81% ground beef price from fed steers and heifers, at $345.16, sits below its January starting level but slightly under last year's $345.58 and well above 2024's $308.78.
On supply, Hales estimates today's slaughter at 110,000 head and week-to-date slaughter at 327,000, versus 326,000 last week, putting the weekly pace at about 554,000 head. The firm says it has heard there is too much beef in the pipeline and expects packers to trim slaughter to a 533,000–543,000 head range to reduce cutout declines. Cow slaughter may have risen 7,000–8,000 head week over week, which could ease pressure on some cuts while adding downside risk to 90% lean beef and items such as peeled fed-cattle knuckles.
In futures, December live cattle reached $232.45, only 27 points below a 61.8% retracement level Hales had flagged earlier in the week. Hales says volume faded once the rally reached the high-$18,000 area, and that the advance has pushed December from a discount to cash to a premium. Technical indicators are overbought without confirmed sell signals, and the firm looks for a corrective decline in cattle futures. In feeders, March contracts have rallied more than $40 since the early-September low, as corn fell more than $1 per bushel. Hales argues a corn bottom could set up a grain rally that limits feeder upside. March corn hit $5.64 on Sept. 2 and settled at $4.77¾ after a session low of $4.68¾, and the firm flags potentially bullish South American weather under El Niño conditions that it believes is not yet priced into corn. It suggests cattle-on-feed operators consider options or futures to hedge 2027 feed costs.
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