3 June 2020

2 minute read

North America

Reuters reports that the US slaughter pace has picked up, sending more beef into retail channels.

CME June live cattle settled down 3 cents at 95.300 cents per pound, while most-active August closed down 2.775 cents at 96.200 cents per pound after dipping to 96 cents, the contract’s lowest value since 6 May.

August feeder cattle futures settled down 2.700 cents at 133.425 cents per pound.

Currently, US slaughterhouses are processing a backlog of cattle and pigs that built up earlier this spring as the COVID-19 pandemic sickened slaughterhouse workers. The outbreaks forced numerous facilities to shut down.

"The slaughter numbers have come back much faster than the industry anticipated. [Meat] packers have done a great job getting everybody back to work and working through these animals," said Jeff French, analyst with Top Third Ag Marketing in Chicago.

According to USDA data, Tuesday's cattle kill totalled 113,000 head, and the weekly slaughter could reach 630,000 head, French said, nearly reaching levels before the pandemic began.

In addition to increased slaughter pace, the cattle arriving at processing plants are heavier than normal, bolstering beef supplies.

"Carcass weights are higher [than] a year ago. So we've got big cattle out there to move," said Don Roose, president of Iowa-based US Commodities. "That means we have more meat coming at the consumer," Roose said.

Consequently, wholesale beef prices have been retreating from historic highs reached in mid-May, a factor that should pressure cash cattle prices. The choice boxed beef cutout, an indicator of wholesale prices, fell on Tuesday afternoon to $318.73 per cwt, down $22.42 from Monday and down nearly $67 from a week ago, according to the USDA.

As profit margins for meat packers narrow, "they are going to be very reluctant to pay up for cash cattle," French said.

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