Heavier cattle, higher dairy cow slaughter mask commercial beef declines

admin | March 23rd, 2015 - 11:56 am

The combination of heavier dressed weights of cows due to more dairy cows in the slaughter mix and heavier weights for cattle on feed should push beef production in the first half of 2015 to close to first-half 2014 levels, according to USDA’s latest Livestock, Dairy and Poultry Outlook report.

Heavier placement weights this past fall and winter might imply more beef production during the first half of 2015, but the decline of second-half cow slaughter and moderating carcass weights are expected to result in lower second-half beef production, the report concluded.

Further signs of cow-herd rebuilding
USDA data showed fewer heifers slaughtered in January compared to a year ago and USDA analysts suggest the reduction of heifer slaughter in the steer and heifer mix is likely a result of producers retaining some extra heifers for breeding purposes.

However, commercial beef cow slaughter was down by 24 percent, leaving total January commercial cow slaughter down by 11 percent year over year, indicating efforts to rebuild the beef-cow herd.

Meanwhile, January commercial dairy cow slaughter was up 2 percent year over year with weekly data indicating a continuing pattern of relatively high dairy cow slaughter, with average dressed weights for all cows reaching a weekly record high of 663 lbs per carcass.

Beef prices and packer margins
The undertone in the wholesale beef market remains soft but should not be confused with poor demand, according to USDA. From a historical perspective, total meat consumption tends to languish during the winter quarter but is followed by a period of increased consumption as the spring grilling season approaches.

At least in the short term, packers continue to operate in the red as buyers at the wholesale level remain reluctant to significantly increase beef purchases.

While wholesale beef cutout values did rally noticeably in late February as a result of reduced steer and heifer slaughter, prices have not been high enough for packers to experience a sustained period of positive margins, even though certain components of the cutout — such as 90 percent lean beef — remain at historical record levels.

Retail beef prices rose to record highs in January, with January 2015 Choice retail beef at $6.33/lb. — up almost a dollar from this time last year — and all fresh retail beef at $6.00/lb, up over a dollar from January 2014.

In comparison with competing markets, the spread between beef and pork and beef and chicken remains wide, and this could leave beef at a disadvantage in seasonal consumer purchasing patterns and the mix of retail features on a weekly basis.

The popularity of ground beef remains intact despite ground beef prices above 2014 levels. Lean processing beef prices subsided in February but remained well above the five-year average.

Imports of lean processing beef from Australia and New Zealand remain robust and are alleviating some of the upward momentum in the spot lean-processing meat markets. Nonetheless, beef prices are not expected to undergo the large decline anticipated in the pork and poultry markets this year, according to USDA.

Meatingplace.com, 3-18-2015

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