Slaughter Rates Down, Tell Only Part Of The Story

Cattle slaughter last week reached an estimated 502,000 head, according to the USDA, down 23,000 head or 4.38%, from 525,000 the previous week and the lowest this year.  But just looking at the raw slaughter data does not tell the whole story.

A graph from the Livestock Marketing Information Center shows how weekly slaughter compares with the same week a year ago and the average of the previous five years.  It’s interesting to note that slaughter last week was only slightly above the seasonal low point surrounding the Independence Day holiday.

All things being equal, a lower slaughter rate would mean less beef is being produced and that product prices should rise.  Week-to-week comparisons also could mean slaughter-ready cattle are backing up in the feedlots.

But all things are not equal.  Year-to-date beef production is down, but by a lesser amount than the lower slaughter rate might predict.  Beef production last week totaled 408.3 million pounds, down 4.5% from 427.7 million the previous week and 10.4% less than the 455.6 million in the same week last year.  This put annual beef production so far at 6.247 billion pounds, 5.5% less than the 6.613 billion at this point in 2014.




Beef production is not coming down in lockstep with cattle slaughter because cattle are getting larger.  But weights don’t fluctuate as quickly as the slaughter rate, being more of a trend issue.

Feedlots have been feeding cattle to heavier weights to maximize per animal returns since cattle are sold by weight, and their operating margins are in the red.

The average live cattle slaughter weight last week was 1,350 pounds, and while this is two pounds lighter than the 1,352 of the previous week, it is 36 pounds more than the 1,314 pounds of the same week a year ago.




Packers also have had a part in paring the overall cattle slaughter as they try to get their margins back into the black.  They have been less aggressive about bidding on cattle from the feedlots, allowing cattle to back up and cattle feeders to become more aggressive about moving them on to slaughter.

But with the grilling season looming or having begun in some parts of the US, it seems odd that packers would cut back on slaughter intentionally.  A look at the amount of beef in cold storage could provide a clue.

On March 23, the USDA reported the total volume of beef in cold storage was up slightly from February, but was 20% larger than a year earlier.  As of Feb. 28, there were 492.371 billion pounds of frozen beef on hand, versus 491.989 billion a month earlier and 409.507 billion a year earlier.

Beef packers may be targeting these stored supplies for movement during the grilling season, which usually increases consumer beef demand.




Cash cattle markets Monday were quiet.  Last week, a few cattle changed hands at $163 to $165.50 per cwt on a live basis and at $261 to $263 dressed, compared with the bulk of the previous week’s action at $167 and $265 to $267.

The USDA’s choice cutout was up $1.19 per cwt at $257.70, while select was off $0.72 at $249.19.

The CME Feeder Cattle Index for the seven days ended Friday was $219.57 per cwt, down $0.11, compared with Monday’s settlement of the Apr futures contract at $212.25, down $0.20.