Sort & Cull

Chain Speeds, the Cash Market and Beef Demand

ShayLe Stewart
By  ShayLe Stewart , DTN Livestock Analyst
With boxed beef prices trading comfortably above $300 for choice, will packers get anxious to sell more beef and choose to run faster chain speeds in the near future? (DTN file photo by Chris Clayton)

The dynamics of "cause and effect" are especially interesting in the cattle market. Just when you think you have everything figured out and understand how the different sectors of the market trade among one another, you're often humbled and reminded that markets are people, and people are often unpredictable.

One market factor I've been especially interested in lately is chain speeds. For two consecutive weeks in a row now, packers have elected to reduce chain speeds to keep cash cattle prices steady. Last week's slaughter was estimated at 599,000 head, and the week before that, only 593,000 head were processed. If packers slow chain speeds, they lessen their need to support the cash market, which consequently keeps prices from rolling higher and affecting their bottom line.

But with boxed beef prices trading comfortably above $300 for choice cuts, will packers get anxious to sell more beef and choose to run faster chain speeds in the near future?

One could argue that boxed beef prices are lucrative enough for them to logically choose to do this. But I don't believe they'll make a short-term, short-minded decision to do that. I find it much more likely packers keep chain speeds reduced so cash prices don't trade higher and so supplies of market-ready cattle slowly start to build back up.

ShayLe Stewart can be reached at ShayLe.Stewart@dtn.com

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