Second Largest Post COVID Kill Confirmed

By Cassie Fish, http://cassandrafish.com

The second largest cattle slaughter since social distancing was confirmed today by the USDA, 664k head, just 1k less than the 665k posted in June. However, the fed slaughter that same week was 525k head however, 8k less than that same week in June when the fed slaughter was 533k. This also falls short of larger fed kills in July and August. It was 19k larger than 2019 for the same week.

Steer carcass weights that week were unchanged at 924 pounds and fell 4 pounds short of the all-time record posted in 2015, also the last time the current number of yield grade 4s and 5s were close to that 2015 record. Not a surprise because of the 2 month slaughter disruption earlier this year that resulted in a significant backlog of fed cattle.

The industry has made progress, but fed cattle supplies in general are adequate and packers have retained a great deal of leverage.

The seasonal low in boxed beef prices is being made now, 2 weeks later than ‘normal’ since a very strong and rather unusual rally in loins especially lifted the cutout in late September. Trim and grinds continue to be a drag thanks to loss food service, but a seasonal rally in middles will occur between now and Thanksgiving. The August rally to $230 would seem a modest objective.

Packer margins remain solid and they are able to balance throughput with demand deftly. A brisk pick up in orders translates to Saturday hours being added.

Cash cattle prices have been a disappointment this week, trading about 0.70 cheaper on average than last week. As of yesterday volume was 73k head and trade has continued today, $108 in western Nebraska and as low as $106 in Iowa.

As COVID instances increase anxiety does as well, though packing plants have maintained strict social distancing, masks, face shields, health checks etc. Still the fear of a second wave is unnerving and economic data is concerning to some.

All of this has pressured live cattle futures this week and open interest has declined 11k contracts. Live cattle 2021 contracts have not taken out Tuesday’s low today and are sitting on the 100-day moving averages. Most active Dec LC has made a new low for the week. All are below the 40-day moving average except liquidating Oct LC.

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