Cattle supply is certainly not the issue, rather, it’s a COVID-induced absenteeism issue in many of the country’s packing plants. It’s impossible to project the timeline in
which a more efficient slaughter pace will be restored, yet it can’t come soon enough. The velocity at which boxed beef cutout values are increasing is troubling as we look at demand. The Choice cutout is up 6.9% since it marked the $261/cwt. seasonal dip in late Dec. That compares to a 4.8% increase for the same period a year ago, but the Choice cutout is 29% higher than a year ago as well. It’s another unintended consequence, but one that remains a headwind. A few production considerations come to mind with the factors outlined above. Carcass weights in the latest data are on the rise again, after pulling slightly lower in late December. Should the pace of slaughter continue to disappoint, we will see seasonally higher carcass weights in a period where lighter weights are the seasonal trend. Even if the trend turns lower with fresh data, weights are 15 lb. heavier than a year ago. Fed cattle performance has been exceptional this winter and average-daily-gain figures are above average. This condition, coupled
with potentially added days on feed resulting from slower processing throughput, may push carcass marbling scores higher, on average. This could be a shot in the arm for supplies of high-grading CAB and Prime carcasses. This potential outcome is a silver lining in a supply-starved market, where product availability is key to continued brand commitment from the important retail sector. As well, smaller total fed cattle carcass supplies equate to fewer CAB carcasses on a weekly basis, regardless of what proportion of carcasses qualify for the brand. This suggests that end-users will have to pay a premium for higher quality which, in turn, pushes cutout price spreads
wider. A net result to cattle feeders is that packers will seek out the pens of brand-eligible cattle with a higher propensity to grade and quality for CAB. Moving into spring the potential for carcasses surpassing 1,050 lb. as well as higher percentages of yield grade 4 and 5 carcasses tends to seasonally decline. Yet, should this slaughter pace continue at a slower speed, these risks remain a bit higher than in other years. Cattle feeders will need to watch these two metrics as they look to merchandise their higher quality cattle on a carcass value basis, in order that discounts don’t overcome premiums. Yield grade 4s and 5s have continued to creep higher on an
annual basis, yet current conditions may pose additional risk in the near term.
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