Cold May Cut Slaughter Weights Short Term

The polar vortex hammering the US this week with subzero temperatures and heavy snow and ice likely will reduce fed cattle slaughter weights and affect beef production in the short term, but the effect may escape national annual statistics as the effect likely will be short-lived.

Cattle feeders usually keep cattle an extra week or two after such storms abate to allow cattle time to recover, raising short-term cattle prices but negating long-term effects on beef production.

The USDA’s Economic Research Service Tuesday predicted total 2014 beef production at 24.459 billion pounds, up 103 million, or 0.42%, from its October estimate of 24.356 billion.  Lower feeding costs allow longer feeding periods and the slaughter of larger animals with more beef per animal.

 

LOWER CORN PRICES PRESENT OPPORTUNITIES

 

The lower corn prices have given feedlots profit opportunities not seen in several years, although feeder cattle prices remain strong and threaten to undermine feeder profits.  Feeder cattle are running more than $220 per cwt, pushing breakeven costs for Southern Plains fed cattle toward $170 per cwt.

Up until the latest weather break, conditions for most US cattle producers were very favorable with improving pasture conditions increasing the potential for expanded cow/calf production.  In fact, lower beef cow slaughter since July has shown a desire among cow/calf producers to re-grow their cow herds for greater calf production.

Hay supplies also appear to be ample for the winter feeding period.  Prices have declined, and a drive through the country shows more large round bales of grass hay stacked and ready for use or sale.

However, calf and beef production will not be enhanced by a larger cow herd in 2014.  The comparatively slow rate at which cattle reproduce and grow will prevent any increase in slaughter rates until next year at the earliest.  The ERS said the next few years likely will be characterized by growth in cow numbers and slaughter as the national herd is rebuilt.

 

PRODUCTION INFLUENCED BY HEIFER RETENTION

 

Beef production estimates are further influenced by heifer retention.  Not only are heifers being kept for breeding rather than being sent to the feedlots for eventual slaughter, which reduces heifer beef production, but the increased percentage of steers in the slaughter mix increases steer beef production, and steers are larger.

Dressed weights are up 25 pounds a head, or 2.85%, year over year from the combination of longer feeding periods and the increased proportion of steers in the slaughter mix.

As long as feed prices remain reasonable, and feeder cattle prices don’t run away with profits, feedlots may continue to see good profit potential.

 

PACKERS SUFFER NEGATIVE MARGINS

 

But even though cow/calf producers and feedlots are seeing better profits and profit potential, the nation’s packers are going through a seasonal period of negative margins that are greater this year than in recent years.  The Sterling Profit Tracker this week said packer margins are more than $83 per head in the red, nearly double what they were a month ago and $48 more than last year’s average of $35 a head as beef prices languish and fed cattle prices rise.

High wholesale and retail beef prices are seeing some pushback from retailers and consumers, and buyers increasingly are able to offer alternative meats to shoppers at more attractive prices.  Sources say retailers are showing more of a tendency to put beef on special.

The USDA reported its choice beef cutout Tuesday at $254.29 per cwt, up only $0.02 while select was up $1.23 at $241.26.  Only 88 loads of fabricated product were sold into the spot market.