Cattle Herd Rebuilding Efforts Intact

Herd rebuilding efforts among US cow/calf producers remain intact, as total cow slaughter maintains its wide gap below last year and the previous five-year average.

Cow slaughter diverged from last year the last week of February and parted ways with the five-year average the last week of March and has been well below both ever since.  During the week of the Thanksgiving Day holiday, total cow slaughter was listed by the USDA at 87,159 head, down 15,741, or 15.3%, below 102,900 head in the same week last year.

The five-year average of data has the Thanksgiving Day holiday in the previous week, so comparing one holiday week to another, this year’s kill is 28,741, or 24.8%, below the average.

Heifer slaughter also is down.  USDA data shows Thanksgiving week slaughter at 148,926 head, down 8,574, or 5.44%, from 157,500 head the previous week.

Comparing this year with the five-year average holiday week shows this year’s heifer slaughter was 24,314 head, or 14.0%, below the 173,240 average.

 

STEER SLAUGHTER ALSO DOWN

 

Steer slaughter also is below a year ago and the average, having diverged after the second week of September.

So with steer slaughter down and heifer slaughter down, it appears cattle could be backing up in the feedlots – that is, if previous placement rates held steady or expanded.

USDA figures show feedlot placement rates climbing and following year-earlier rates very closely beginning with the September Cattle-On-Feed report.  The most recent report had total placements at 2.357 million head, compared with 2.378 million the year before and the five-year average of 2.394 million head.

The December On-Feed report is scheduled for release at 3:00 p.m. EST Friday.

More evidence that cattle are backing up is the higher slaughter weights.  USDA data show the most recent weekly steer carcass weight at 901 pounds, the same as a week earlier but 26 pounds, or 2.97%, above the 875 pounds of a year earlier and 42.8 pounds, or 4.99%, above the five-year average of 858.2 pounds.

The combination of lower heifer slaughter, lower steer slaughter, seasonally rising placements and higher carcass weights have many traders thinking cattle are backed up at the feedlot and this “knowledge” is being cited as a primary reason for cattle futures being lower currently.

Moreover, the higher slaughter weights are causing some to wonder just how heavy cattle can be made.  As they get heavier than optimum weight, their feed efficiency declines, and they become too expensive to keep on feed.  Without improved genetics, cattle may be flirting with their maximum economic size.

 

CASH MARKET REMAINS QUIET

 

The cash cattle market remains quiet with larger feedlot showlists in nearly every major producing area of the Plains.  More cattle being offered to packer buyers will undermine feedlot efforts to garner higher prices this week.

No bids or offers were reported in the Plains through Tuesday, but asking prices are expected around $166 per cwt on a live basis.  Cattle traded last week at mostly $164, down about $4 from the previous week, and at $255 to $257 on a dressed basis, down $8 to $10.

Feeder cattle continue to drop.  Monday marked the third straight day that all contracts locked down the daily limit of $3.00 per cwt, the lowest the nearby Jan contract has been since Sep. 25 when it hit a low of $222.60.  Momentum traders may try to see if there are more sell orders below Tuesday’s settlement.

The CME Feeder Cattle Index for the seven days ended Friday was $237.48 per cwt, up $0.58 from Thursday a severe premium Jan’s settlement of $222.60.