Right on schedule, federally inspected cattle slaughter this week is headed for an increase.
Through Thursday, the USDA reported an estimated 445,000 head had met their destiny this week, up 6,000, or 1.37%, from last week. However, it remains 6.71% below last year’s 477,000.
It’s likely to remain below last year, too. Previous placements of cattle into feed yards point to fewer cattle being available to slaughter into next year. What’s more, reduced heifer slaughter indicates more of them are being held for breeding, which means they won’t be slaughtered for years, and their calves won’t be available for feedlot placement for months.
A graph of USDA weekly slaughter numbers shows the pace of slaughter this year is following closely the pattern of the five years prior to last year. This has been especially true after the Independence Day holiday when only two weeks following the Labor Day holiday dipped instead of held relatively steady.
Following the five-year average, cattle slaughter last week should have declined, which it did. It also should increase this week or next week into the Thanksgiving holiday week. The fact that Thanksgiving occurs late in the month this year may mean another week of stronger slaughter before the holiday slump.
That could translate into firmness for the cash cattle markets for another week.
FIRST CASH TRADES ABOUT STEADY
The first fed cattle trades of the week were reported in Nebraska Thursday at $168 per cwt on a live basis, reportedly to augment this week’s slaughter inventory – not begin next week’s. The alleged swift slaughter date could be why steady prices were paid, but the price also opens the door for steady prices to be paid elsewhere today.
Dec live cattle futures settled $0.15 higher Thursday at $165.25 in anticipation of a firmer cash cattle market this week than was expected until reports of steady cash sales trickled in to the pit. The contract remains technically weak, closing below key moving averages for the second straight day and continuing a downward-sloping channel as total open interest declines.
Sources also indicated that the rising US Dollar may now be showing up in beef export sales. Exports reported Thursday morning were 45% below the four-week average.
Wholesale beef prices Thursday softened as demand weakened and packer offerings remained steady, sources said. The USDA’s choice cutout value Thursday declined $0.72 per cwt to $250.52 while the select cutout dropped $0.87 to $237.25.
Those prices keep the market below a week ago, although the choice value remains above this week’s low that was set on Tuesday of $250.14. Select prices have been softer all week except for a jump on Monday to $239.40, which virtually tied last Thursday’s $239.41.
However, the number of cattle offered for sale this week was down from last week in all major segments of the Plains, which could provide more negotiating leverage for sellers.
All of that, the lackluster-to-weak beef market plus a downward trend to futures balanced by smaller feedlot showlists, steady early cash sales and hints of tight packer inventories leaves cash in a state of flux.
But since markets don’t like uncertainty, the end result could be a steady cash range with greater numbers traded at the lower end of the range.
The CME Feeder Cattle Index for the seven days ended Wednesday was $240.36, up $0.37 from Tuesday, above the nearby Nov contract’s Thursday settlement of $236.52, up $0.75.