The choice beef cutout has spiked in the last few days and only some of this is due to the disruptions brought about by extreme winter weather. But winter weather disruptions has had a significant impact so it’s best to start there. Extreme cold negatively impacts cattle in feedlots as livestock burns more energy to stay alive. We have yet to see the full effect of this, it will be more an issue for January as extreme cold weather results in lower gains and delays marketings.

Feedlots already were more current than a year ago. On December 1 the supply of cattle with +120 days on feed was estimated to be 76k head smaller than the previous year, and the lowest December 1 inventory of market ready cattle since 2018. Add to this the stress of winter weather and availability suddenly plummets. But while this will impact supplies in the coming weeks, in the very near term the storm has significantly affected the movement of cattle from feedlots to processing plants, plants’ ability to bring workers in, and the movement of beef from processing plants from the middle of the country to metropolitan areas.

Fed cattle slaughter for the week of December 5 was running near full capacity, with daily slaughter hovering around 98‐100k head/day. Total fed cattle slaughter for that week was 497k head. The following week slaughter declined 16k head and then it declined another 69k head the week after. So the week of December 19 fed cattle slaughter was 15% lower than two weeks prior. If the last two years have shown us anything it is that the beef market can be very inelastic in the near term, with retailers and foodservice operators needing to get supply for the meat case and run further processing plants.

Normally we see the price of bone‐in and boneless ribeyes decline sharply in December once Christmas orders have been filled. That was not the case this year because packers simply did not have the meat to fill those last minute orders, causing buyers to scramble to get replacement product in a very thin spot market.

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Daily Livestock Report - Steiner Consulting Group