CAB Insider: Outlook for Heifer Retention and Cow Numbers
Paul Dykstra, Certified Angus Beef
via Drovers - July 1, 2020
In the past few weeks the fed cattle market has brought to fruition the results many suppliers have been bracing for. The slippery descending slope from record cutout values has developed into a further weakening of fed cattle prices.
Packer profits have also adjusted much lower from record levels seen just weeks ago, but are estimated in a very positive range above $200/head. Feedyard leverage is a non-factor and feeders continue to push an overfinished cattle inventory into the processing funnel as much as they’re able to at lower prices.
The dynamics described previously have followed a predictable pattern laid at our feet by the packing sector’s shutdowns in May.
Less predictably, and much more exciting, is the fact that packers posted the giant 680,000 head harvest total last week. This was achieved with weekday totals around the 95,000 head range and a Saturday total near 82,000 head, 85% of which were fed cattle.
This week’s Independence Day holiday will have packing firms reducing or eliminating processing late this week, presumably to a varying degree depending on the company. This being the case, we assume packers are preparing for the holiday production void with a push to build supplies ahead of time.
One fact that we don’t want to overlook is the simple fact that packers have proven capable of not only large weekly production (bolstered by extra Saturday hours) but of daily head counts on par or larger than a year ago. This is precisely the cure the trade needs.
Carcass cutout values have been locked in a downward pattern as the boxed beef trade searches for more practical price points on several items. The end meats have undergone all of their necessary adjustments already with most of those subprimals priced just above a year ago. Some items, such as CAB briskets at $2.50/lb., wholesale, are currently discounted below a year ago.
Ribeyes and strip loin prices continue to drift lower as they’ve remained at unrealistic levels for a longer duration. This is partially a seasonal effect with late spring grilling demand and the return of foodservice buying keeping those prices elevated. They’ll continue lower with larger production volumes and the dog days of July upon us now.
Consumers have yet to see lower beef prices as distributors recently continued to pass the cost of their recent inventory, bought weeks ago at higher prices, down the line to retail.
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