Fed Cattle Market Purge Continues, Peel EvaluatesMon, 28 Sep 2015 11:45:00 CDT
Derrell S. Peel, Oklahoma State University Extension Livestock Marketing Specialist, writes in the latest Cow/Calf Corner newsletter.
Fed cattle prices dropped over $9.00/cwt last week to about $125/cwt. Prices for pens over 80 percent Choice made up most of the volume and had a lower average price than lower grading pens of cattle. This has been the situation for several days are reflects the large supply of extremely heavy fed cattle. There are anecdotal reports of fed cattle in the Midwest with live weights up to 1900 pounds. These cattle are finally being marketed. The estimated weekly cattle slaughter last week was 574 thousand head, up fractionally from 573 thousand head one year ago. Estimated cattle carcass weights last week were 843 pounds, up 25 pounds from the same week last year. Estimated weekly beef production was up 2.6 percent year over year. The extra carcass weight is equivalent to adding over 17, 500 head to the weekly slaughter total at last year's carcass weights.
The most recent actual slaughter data (for the week ended September 12) showed record large steer carcass weights of 919 pounds, 13 pounds over last year's seasonal peak weight of 906 pounds in November. Heifer carcasses averaged 826 pounds, slightly below the record 830 pound level in November, 2014. With beef cow slaughter currently making up a larger proportion of total cow slaughter, cow carcass weights are falling; the current level of 638 pounds is down from the May peak of 660 pounds.
The boxed beef market reflects current large supplies of beef and especially Choice beef. Choice boxed beef prices have fallen faster than Select with Choice prices down $14/cwt. this past week compared to a $9.50/cwt. decrease in Select boxed beef prices. Choice boxed beef price ended the week at $212.23/cwt. compared to $209.80 for Select boxed beef. One result is an unusual counter-seasonal narrowing of the Choice-Select spread, dropping to $2.43/cwt by the end of the week. Typically, the Choice-Select spread is around $11/cwt. at this time of year.
It appears that the needed purge in fed cattle markets is underway. It will likely take another two or three weeks to complete the process and get feedlots current on marketings. The thoroughness of this will set the stage for fed markets for the remainder of the year. A peak in carcass weights and strong weekly slaughter totals will be indicators of successfully cleaning up this mess. It is important to remember that overall feedlot numbers are not burdensome (placements have been down for many months); it's just the supply of heavy cattle that is burdensome. Fed and boxed beef markets will be in a position for a significant recovery assuming the current purge is successful.
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