Packer Margins Pushing Cattle Slaughter, Prices: ERS

The USDA’s Economic Research Service said this week that packers had pushed slaughter levels higher in the fourth quarter, raising the quarter’s beef production forecast by 100 million pounds from November to nearly 7.0 billion pounds.

The forecast came in the monthly Livestock, Dairy, and Poultry Outlook and went on to predict annual 2019 beef production at 27.1 billion pounds.  The increase was based on a faster-than-expected pace of fed and non-fed cattle slaughter in November and early December.

Greater fed cattle slaughter may in part reflect the packers’ inclination to capture stronger-than-typical margins as wholesale boxed beef prices averaged significantly more than 2018 during November and into early December, the ERS said.

Feedlots also have a higher proportion of cattle on feed for more than 150 days, and the narrowing of the choice/select spread may also be providing incentives to bring additional cattle to market, the report said.

Based on the National Agricultural Statistics Service’s Livestock Slaughter report for October, the pace of cow slaughter, particularly beef cows, was well above year-earlier levels, the ERS said.  The price for live cutter cows for the week ending Dec. 6 was $53.76 per cwt, more than 16% move than a year earlier.  This, coupled with tight forage supplies for some producers, likely is encouraging a higher culling rate.




On Dec. 2, at the Oklahoma City National Stockyards, sales of feeder steers weighing 750 to 800 pounds were reported at $146.48 per cwt.  Based on recent price data, the fourth-quarter 2019 feeder steer price was raised by $3 to $147 per cwt.  The 2020 annual price forecast for feeder steers was raised by $2 to $144 per cwt, the ERS said.

Despite wholesale prices declining from abnormally high levels in mid-November, packers continue to pay higher prices to bid cattle out of feedlots, the ERS said.  The price forecast for fourth-quarter 2019 was raised by $2 to $114 per cwt.

That price strength was carried into 2020 forecasts, the report said.  The 2020 annual price forecast for fed steers was raised by $1 to $117 per cwt, with prices in the first two quarters raised to $122 and $118, respectively.




October beef imports were 241 million pounds, more than 6 million, or 2.7%, higher than the previous year, the ERS said.  The year-over-year increase was attributed largely to expanded imports from two of the US’ major suppliers, Canada and Mexico, whose shipments were up 6 and 8.4 million pounds, respectively, along with increased shipments from Nicaragua (up 4.5 million pounds), and Brazil (up 2.6 million).

October beef exports fell in October to 249 million pounds, a decline of almost 25 million from a year earlier, the ERS said.  This reduction occurred among all major US beef export destinations, including Japan, Mexico, South Korea, Canada, Hong Kong and Taiwan.




Cash cattle trading was reported this week at $120 to $121 per cwt on a live basis, up $0.50 to $2 from last week.  Dressed-basis trading was seen at $192 per cwt, up $2 to $4.

The USDA choice cutout Thursday was down $0.58 per cwt at $208.99, while select was off $0.58 at $200.99.  The choice/select spread was unchanged at $8.00 with 102 loads of fabricated product sold into the spot market.

Two steer contracts were tendered for delivery against the Dec delivery month Thursday.

The CME Feeder Cattle index for the seven days ended Wednesday was $145.75 per cwt, up $0.28 from the previous day.  This compares with Thursday’s Jan contract settlement of $144.72, up $0.72.