The feedlot situation is improving but it will take longer to process current feedlot supplies, and challenges at the packing level will slow the process for at least several more weeks, said Oklahoma State University Extension Livestock Specialist Derrell Peel, in a letter to Extension agents called Cow/Calf Corner.
PACKER CAPACITY THE BOTTLENECK
The bottleneck in fed cattle markets this year has been packer capacity constraints that limit their ability to process fed cattle, Peel said. Limited packing infrastructure, combined with chronic labor issues, have made it impossible for packers to process cattle any faster.
Total cattle slaughter is up 1.8% for the year to date compared with 2019, he said. (Comparisons to 2020 are not meaningful given the massive pandemic disruptions last year.)
Year to date steer plus heifer slaughter is up 1.6% from 2019, Peel said. Average weekly steer plus heifer slaughter for the first 18 weeks of 2021 is 496,051 head, up 2.0% from 2019. In fact, the 2021 year-to-date weekly average is the highest since 2011.
PACKER CHALLENGES
A look at daily slaughter statistics reveals the beef packing capacity challenges, he said. Although the average weekly total is larger thus far in 2021, daily averages reveal the struggles to maintain slaughter levels.
Compared with 2019, average daily slaughter is down four days per week, with Mondays down 4.3%, Wednesdays down 1.0%, Thursdays down 1.3%, and Fridays down 7.1%, Peel said. Tuesday slaughter has averaged 3.1% higher.
The big change is Saturday slaughter, which has averaged 62.7% more in 2021 than in 2019, Peel said. Maximum weekly slaughter is 3.5% less than 2019 despite a larger weekly average.
Maximum daily slaughter is lower for all days except Tuesday, which is 0.3% higher thus far this year, he said.
Even Saturday slaughter, which is averaging 62.7% higher this year compared with 2019, has a daily maximum that is 25.6% less than 2019, Peel said.
All of this means packers have less total capacity but are using the available capacity more consistently, he said.
But the reliance on Saturday slaughter this year will be increasingly difficult to maintain going forward, he said. Not only are labor agreements and the willingness of labor to work Saturdays a concern, but persistent Saturday shifts reduce opportunities for packing plant maintenance and could lead to more breakdowns and disruptions in operations.
Feedlot inventories typically increase early in the year to an April peak before beginning a seasonal decrease into late summer, Peel said. The current marketing rate suggests feedlots will pull inventories down over the next two or three months and reflect cyclically tighter cattle numbers at some point in the second half of the year.
CATTLE, BEEF RECAP
Fed cattle traded this week at $118 to $120 per cwt on a live bases, steady to $1 lower than last week. Dressed-basis trading was at $188 to $191, steady to down $1.
The USDA choice cutout Thursday was up $0.49 per cwt at $329.98, while select was up $0.05 at $304.10. The choice/select spread widened to $25.88 from $25.44 with 82 loads of fabricated product and 20 loads of trimmings and grinds sold into the spot market.
The USDA reported Thursday that basis bids for corn from livestock feeding operations in the Southern Plains were unchanged at $1.05 to $1.17 a bushel over the Jul futures, which settled at $6.64 1/2 a bushel, up $0.40.
The CME Feeder Cattle Index for the seven days ended Wednesday was $136.57 per cwt up $0.22. This compares with Thursday’s May contract settlement of $136.30 per cwt, down $0.20 and Aug’s $152.85, up $2.35.