Improvement

By Cassie Fish, http://cassandrafish.com

Yesterday’s daily federally inspected cattle slaughter reached 117k head, the largest thus far in January and a clear improvement. Expectations are that daily slaughter levels will push back to 120k to 122k on a regular basis and the temporary slowdown of throughput will be behind the industry. 

This news sent CME cattle futures a lot higher on the opening and futures are holding triple digit gains through the trading session. The charts look bullish as multiple contract months have cleared moving averages and appear poised to ultimately return to contract highs. This assumes of course that plant operations will continue to improve and packers, with expanding margins and outstanding demand, will push production levels back up to book profits and ship orders to eager end users. 

The rest of news has not changed as wholesale beef prices continue to rally, despite the fact that they are a historical highs for any January in history, choice values $70 per cwt higher than a year ago. This fact coupled with negotiated cash cattle prices only their third highest for any January, behind 2014 and 2015. The differences being that fed cattle supplies are much larger than in those years and beef demand is much stronger. 

Because fed cattle supplies are much larger than in those historically tight supply years of 2014 and 2015 and plant hourly and daily throughput is less now than it was pre-April 2020 when the pandemic struck the industry with full force, packers do not have to compete aggressively to fill their slaughter schedules. So cattle prices– though they have risen steadily after bottoming the summer of 2020 at $95 to the top price reached in early December 2021 of $140— remain limited to what is achievable, even in an up market. 

This fact continues to frustrate cattle producers and benefit beef packers. The biggest surprise for packers and all in the industry though is beef demand itself, both global and domestic. For it is that demand which has supported record retail and wholesale prices in 2021 and contributed mightily to packers bottom line.  

This week’s negotiated cash cattle trade has occurred mostly at $137 live, dressed $217 to $220, generally steady with last week. The week-to-date total traded as of this morning is 27k head.

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