Status Quo

By Cassie Fish,

Boxed beef values have barely moved this week, cash cattle have traded steady to a touch stronger, hovering around $120. This week’s trade volume is an improvement at 85k head as of this morning, so that’s a plus. June will continue to see a larger fed cattle slaughter than May, which is normal so they need inventory to harvest.

There was good and not so good news in this morning’s USDA actual slaughter data. Carcass weights dropped 2 pounds from a week ago to a new low for 2021.That’s the lightest steer carcass weight since August 2019. However, late May is normally when carcass weights bottom, and 2021 would be over 20 pounds higher than the 5-year average seasonal low.

The disappointing news was the fed cattle slaughter level for the week ended May 29 at 494k head, comprising only 78.4% of the total slaughter that week. That’s a good 20k head lighter than needed to keep cattle moving at a ‘normal’ rate for the available supply and time of the year. It’s already known the following week JBS had cyber woes and that week underperformed by close to 40k on the fed side.

Again, it’s critical that June slaughter levels are big, so this week’s effort needs to exceed 660k head total.

The action in CME cattle futures continues extremely quiet, lightly traded June live cattle gaining modestly on the other contracts and the first four months all green. Feeder cattle futures are lower due to corn strength, though feeder cattle futures are significantly premium to cash feeder prices. And cash feeder prices are plenty high and when coupled with expensive cost of gain are resulting in some breakevens for current placements at $130 and above.

So the optimism reflected in futures has translated to the physical side. This hope is fueled by the reasoning that fewer cattle available second half 2021 and 2022 will force packers to pay up. Cash prices have not exceeded $130 since 2017. And though numbers will tighten some, they are not forecasted to be as low as 2017 fed cattle supplies. Coupled with the throughput challenges the industry still faces, north of $130 does not appear to be a slam dunk.

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