In its monthly Livestock, Dairy, and Poultry Outlook, the USDA’s Economic Research Service lowered its 2016 estimated beef production to 24.7 billion pounds from the previous estimate of 24.8 billion amid lower slaughter weights in May.
However, the estimated 2016 beef production still is 4.12% higher than the 24.7 billion pounds produced in 2015. And the 2017 estimate of 25.8 billion goes up from there.
A graph of weekly USDA-ERS data on slaughter weights shows the industry is making a turn upward in slaughter weights. It also shows this upward turn is seasonal but late, mimicking last year’s bottoming.
It can be argued that the bottoming of slaughter weights is not behind schedule at all and that the 2010-2014 average is skewed to an early bottoming by poor pasture conditions. Poor grazing opportunities resulted in earlier and lighter placements of calves into feed yards in prior months.
If that’s the case, then the annual bottoming of slaughter weights should resemble last year more than the 1010-2014 average. It remains to be seen whether federally inspected slaughter weights will continue to turn higher going forward or whether market conditions will encourage an early trip to the packing plant.
WEIGHTS MAY NOT REACH 2015 HIGHS
But even if the slaughter weight bottom is in, late-summer and fall weights may not reach 2015 highs. Market conditions have changed, encouraging less beef production and lower slaughter weights.
Live cattle futures prices slope downward in succeeding months, telling cattle feeders that the market wants slaughter cattle more now than in the future. It also is warning feeders that their cattle will be worth less in coming months than they are now, and that they should sell them as soon as the packer buyer will take them.
That will scrape off potential poundage from the carcass since they won’t stay on feed longer than is absolutely necessary to get them to an acceptable size and fatness.
All of that is different from last year when beef was a hot ticket, and cattle markets expected prices to keep rising. Beef, especially choice beef, remains a good seller at retail, but the demand for choice beef items is running toward only certain cuts like steaks and ribs.
Other cuts from choice-grading carcasses are not faring so well, but the difference between choice and select beef carcasses may remain wider than usual, creating a conundrum for producers who sell cattle on a live basis.
CASH CATTLE MARKET QUIET
Cash cattle markets Monday were quiet with ill-defined bids and offers. Feedlot showlists were estimated to be mixed but larger overall, which will make it more difficult for feedlots to obtain higher cattle prices this week.
Cash cattle markets last week were $7 per cwt lower at $121 on a live basis. Dressed trades were at $197, down $9 to $10.
A growing number of traders are worried about the strength of beef markets in coming weeks and months. USDA-ERS projections have pork and chicken production up this year and exports not keeping pace with the increased production.
The USDA’s choice cutout Monday was $2.26 per cwt lower at $219.57, while select was off $0.23 at $199.38. The choice/select spread narrowed to $20.19 from $22.22 with 96 loads of fabricated product sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Friday was $143.31 per cwt, down $0.70. This compares with the Aug settlement Monday of $136.67, down $0.75.