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CME: Cattle Breeding Herd Still Expanding

16 November 2015

US - Weekly data released recently by USDA agencies provided some useful perspective, write CME analysts Steve Meyer and Len Steiner.

First, what we refer to as “actual” slaughter data versus the “preliminary” data released on Fridays indicated the highly anticipated seasonal peak in cattle weights, at least for steers, seems to have arrived. So, the backlog of over finished slaughter ready animals in Midwest feedlots has likely dwindled.

Second, in taking a longer term focus, that same report gives relative levels of heifer, steer, and cow slaughter; which can provide indications of any changes in primary producer plans regarding rates of cow herd expansion.

Third, as we keep an eye on the broiler sector, weekly preliminary eggs set and chicks placed continues to indicate output of that sector.

The recently released weekly actual slaughter data are for the week ending October 31st (compiled by USDA-NASS and reported by their sister agency AMS).

Average Federally Inspected (FI) steer dressed (carcass) weight for that week was 920 pounds, importantly that was down 7 pounds from the prior week, a rather large one-week drop. Still, that weight was 18 pounds heavier than a year earlier.

Heifer carcass weight slipped only one pound week-on-week, but they often have less abrupt changes than do steers. Compared to a year ago heifers weighed 20 pounds more.

Just a few weeks ago (week ending October 10th) steer carcass weight was 33 pounds above 2014’s, while the heifer increase was 30 pounds. Of course, those weight trends need to continue in the reported data to help confirm significant progress in working through the market disrupting backlog of over-finished animals in feedlots.

The FI data are just averages and we continue to get reports of some excessively heavy steers still being delivered to packing plants. As has been the situation since mid-September FI cow slaughter continues to be close to or slightly above a year ago, that is a departure from what occurred earlier this year and during the last two years when cow slaughter levels posted significant year-over-year declines.

In several recent weeks, steer slaughter has been well above 2014’s levels (up 4 per cent year-over-year in the latest report). Heifer slaughter remains small and well below a year ago for the latest week, similar to many prior weeks, down 18 per cent from 2014’s.

Overall, those numbers do not year provide any clear signs of changes in beef cowherd expansion plans out in the country; that is, the national breeding herd is still increasing. The numbers do indicate stagnation and likely some modest herd reductions on US dairy farms.

Preliminary data (USDA-NASS) are released each week for eggs set in incubators and chicks placed in growing facilities. Those data showed boiler companies are becoming more cautious about increasing bird numbers.

The slow-down has been caused by greatly reduced profitability from larger birds (by far the biggest segment of the industry) due to the ramp-up in 2015’s production caused by both larger slaughter levels but mostly by surging bird weights.

Additionally, export markets remain depressed. The latest data are for the week ending November 7th, but it is important to look at a series of weeks in these data.

Recently, both eggs set and chicks placed have ranged from below a year ago (down 3 per cent) to about unchanged compared to 2014’s.

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