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Agricultural News

Dr. Derrel Peel Says Cattle Slaughter is Continuing to Recover from COVID-19 Disruptions

Mon, 22 Jun 2020 09:36:57 CDT

Dr. Derrel Peel Says Cattle Slaughter is Continuing to Recover from COVID-19 Disruptions Mondays, Dr. Derrell Peel, Oklahoma State University Extension Livestock Marketing Specialist, offers his economic analysis of the beef cattle industry. This analysis is a part of the weekly series known as the "Cow Calf Corner" published electronically by Dr. Peel and Dr. Glenn Selk. Today, Dr. Peel talks about the third quarter beef recovery.

Cattle slaughter continues to recover from COVID-19 disruptions in April and May. Estimated cattle slaughter for the week ending June 20, 2020 was 656 thousand head, 98.2 percent of year earlier levels. This is based on estimated slaughter. The latest actual slaughter data for the week ending June 6, 2020 shows weekly total cattle slaughter of 627.7 thousand head, 94.4 percent of the previous year.

Steer and heifer carcass weights have been heavier year over year all year but the gap has widened considerably with the delays in marketing fed cattle since early April. For the year to date, steer and heifer carcass weights have averaged 27.4 pounds heavier year over year. However, for the first quarter of the year, carcass weights were up 20.4 pounds year over year, while average carcass weights in the ten weeks from April 1- June 6, were 36.7 pounds heavier year over year.

Year to date beef production through June 19 is estimated at 12.05 billion pounds, down 3.8 percent year over year. Beef production in the first quarter of 2020 was up 8.0 percent year over year. Second quarter beef production is projected to be down 14.0 percent from one year ago. The combination of recovered slaughter and higher carcass weights resulted in weekly beef production in mid-June estimated to be above year earlier levels for the first time in 10 weeks. Weekly beef production is likely to exceed year earlier levels for the third quarter and perhaps for the balance of the year. Third quarter beef production is forecast to be nearly 6 percent higher year over year. Annual beef production for 2020 is forecast to be slightly higher year over year and a new record level at 27.3 billion pounds.

The June Cattle on Feed report shows the slow return to something like normal for feedlots, along with the challenges that remain. The June 1 on-feed inventory of 11.67 million head, 99.5 percent of last year. One month ago, the May 1 on-feed inventory was 94.9 percent of one year ago. The slow pace of May marketings, combined with rebounding placements, pushed the on-feed total up sharply in May. The June 1 feedlot total includes an estimated 5.18 million head of cattle on feed more than 120 days, up 22.9 percent year over year. The backlog of fed cattle will continue to plague feedlots and fed cattle markets for many weeks.

May marketings were down 27.5 percent year over year, a low total even after adjusting for the two less business days for the month compared to last year. May placements were just 1.3 percent below one year ago, following April placements down 22 percent and March placements down 23 percent year over year.   It appears that feedlot placements and marketings will return to more typical seasonal levels from June forward through the second half of the year.

With beef supplies increasing in the second half of the year, beef demand will be critical. Retail grocery will transition from limited beef supplies in recent weeks to ample supplies at the same time that food service demand is slowly building. Wholesale boxed beef prices have dropped nearly back to pre-COVID-19 levels and may go lower into mid-summer as abundant third cattle beef production could highlight potential recessionary demand weakness.



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