Slaughter Expected To Rise
was lower last week as processing plants were closed in observation of
Labor Day on Monday, September 4. Total cattle slaughter was estimated
at 555,000 head, 4.8% higher than the previous year. Expectations are for
slaughter to once again rise to over 600,000 head per week in the next
few weeks as large placements during Mar-May bolster supplies of market
ready cattle. Slaughter has been running at over 600,000 head per week
for the past three months but absorbing this volume of beef after Labor
Day is notably more difficult than at the peak of the grilling season.
Beef demand was quite
robust in May and June but it may have slipped a bit in recent weeks. We
will update you more on this topic later this week when BLS issues its
latest CPI/retail price update. Dr Steve Meyer in the past has regularly
updated our readers on the trend in real per capita expenditures and hope
to continue to do so based on his work. The challenge for the beef/cattle
industry at this point is the number of animals on offer on a weekly basis.
Processing plants are having no trouble finding enough cattle to run full
daily schedules and packers continue to demand a significant premium in
order to run on Saturday. Labor availability remains an issue and, with
no major seasonal demand at this point, packers appear to have little incentive
to raise bids in order to run extra shifts.
Steer weights are
now running around 887 pounds compared to 832 pounds in early May. This
has increased the amount of trim available in the market on a weekly basis.
The increase in trim availability comes at a time when weather starts to
turn and (some) consumers put a cover over their grills. Nowhere is this
shift more evident than in the price of 50CL beef trim. Prices for fat
beef trimmings spiked in early May due to a combination of lower than expected
cattle weights and seasonal demand. At their peak prices were at $200/cwt,
an unheard of price for this item and about double what one could have
Last week the average
price of 50CL beef trim was around $0.48/cwt. If we use the 10% yield rule
of thumb for fat trimmings from the average carcass, the decline in the
value of 50CL trim alone has removed around $124 from the average steer
carcass or $9/cwt for a live steer. Seasonally lower prices for middle
meats certainly have had an impact as well but one needs to consider the
outsize impact that fat trimmings had on cattle prices earlier in the year
and their eventual return to earth.