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CME: Sharp Rise in Cattle Slaughter During W49/2018, Highest Since 2010

11 December 2018

US - Cattle slaughter was sharply higher last week as packers and feedlots looked to get caught up after smaller than expected slaughter in the previous two weeks, Steiner Consulting Group, DLR Division, Inc. reports.

Total cattle slaughter for the week ending 8 December was estimated at 667,000 head, 4.3 percent higher than a year ago and the second highest slaughter for the year (19 May was the highest). This was the highest December cattle slaughter week since 2010.

The increase in slaughter was entirely due to more fed cattle coming to market. While we do not have the USDA estimates for fed cattle slaughter on Friday and Saturday, we currently are projecting fed cattle slaughter for the week at 532,000 head, 5.6 percent higher than a year ago.

Non-fed cattle slaughter is currently estimated at 135,000 head, slightly under year ago levels. These numbers are all subject to revision, however, when USDA publishes two weeks from now a more complete tally based on actual inspector reports.

The latest actual slaughter data is for the week ending 24 November and it shows a modest upward revision from the first estimate (1,500 head) while the cow/bull slaughter numbers were revised lower. Cow slaughter in the last three weeks has been near year ago levels and much lower than the levels we observed in late October and early-November.

The reduction in non-fed supplies has helped support lean grinding beef prices. It was quite encouraging that wholesale beef prices last week managed to hold steady despite the big surge in slaughter.

It will be interesting to see how beef prices perform this week as some of the large Fri/Sat slaughter filters through. The choice beef cutout last week was $213.43/cwt, slightly higher than the previous week and 3 percent higher than a year ago.

The rib primal, which seasonally declines during this time of year, was slightly higher for the week but that appears about to change. The value of the rib primal last Tuesday was as high as $423/cwt but by Friday it was down to $407.

Seasonally rib prices decline in the second half of December as holiday demand wanes. As expected, the value of ribs is coming off a bit earlier than normal this year but largely in line with the seasonal.

Other cuts performed well last week, however, with the chuck and round primals gaining towards the end of the week. End cuts will be critical for the value of the cutout in January, when retailers rotate away from holiday items and feature more cold weather products at competitive price points.


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