Cattle Slaughter on the Rise

5/4/2013 7:00 AM

Cattle slaughter for the week ending April 27 was reported at 625,000 head, 1.6 percent higher than the previous week and 1.6 percent higher than a year ago.

The increase appears curious since packer margins continue to be constrained despite reports of improving demand and expected higher beef prices going into the grilling season.

Looking at the breakout of slaughter numbers, however, it becomes clear what is driving the year-over-year increase.

The estimate for steer and heifer slaughter currently stands at 480,000 head per week, 2.5 percent lower than a year ago. Packers continue their trend of running relatively light Friday slaughter, and Saturday slaughter has averaged under 10 head the past three weeks.

On the other hand, cow and bull slaughter has increased sharply. For the week, total cow and bull slaughter was estimated at 145,000 head, 21.8 percent higher than a year ago.

The sharp rise in cow slaughter has dramatically affected the value of lean cow meat coming to market, with prices quoted at under $202 per hundredweight on April 26.

Seasonally, 90CL beef values usually peak in the second week of May as retailers prepare for Memorial Day ground beef features and foodservice demand also improves, with more people traveling and warmer weather leading to increased foot traffic in quick service restaurants.

But the surge in cow slaughter has caused lean beef prices to run counter their seasonal trend and negatively affected overall beef prices.

The choice beef cutout was quoted on April 26 at $192.89 per hundredweight, $2.59 or 1.4 percent higher than the same period a week ago.

The select cutout is now trading below year-ago levels, with the April 26 value pegged at $184.43 per hundredweight, $1.67 or 0.9 percent lower than a year ago.

Going forward, live cattle futures continue to trade in the low 120s, with only a modest increase into the fall as seasonal demand (year-end holidays) and tighter cattle supplies are expected to underpin cattle and beef values.

Pennsylvania Center for Beef Excellence Inc. with information from the CME Report, Cattle Buyers Weekly and other resources. For more information call 717-705-1689.

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