Sort & Cull

When people begin to analyze markets -- the cattle market in particular -- they become infatuated with prices. They want to know the highest price feeder cattle brought and the stronger the price the better! But once you have sold cattle or have seasoned yourself with a deeper look into the markets, you soon realize volume matters just as much as prices do.

Two weeks ago as we entered 2022, feedlots were ecstatic because packers had chased the cash cattle market between Christmas and New Years and bought near 100,000 head. To be exact, for the week ended Dec. 31 2021, packers bought right at 93,132 head; of that, 71% of the cattle were bought for the nearby delivery while the remaining 29% were bought for deferred delivery. Upon seeing such packer aggressiveness, feedlots knew packers were short bought and with such strong beef demand they were likely to chase after the cash cattle market in the week ahead to meet market's needs. But, before the first week of 2022 had even had a chance to pass by, we stumbled upon our first hurdle.

With rising infections of COVID-19 in packing plant workers, slaughter speeds have been reduced and, in typical COVID-19 fashion, it's hard to tell when this surge will die down. Last week's slaughter is estimated at 620,000 head, which is 32,000 head less than a year ago. Processing just 620,000 head in a week equates to roughly processing 112,727 head daily on a 5.5-day kill schedule. In the last year the market has grown accustomed to seeing closer to 119,000 to 121,000 head processed daily.

Thankfully, with an aggressive kill schedule throughout the fourth quarter of 2021, market-ready supplies of fat cattle are extremely current for the time being. But it doesn't take the market very long to back up supplies and we all remember how painful it was to work through backlogged inventory in 2020.

Moving forward, it will be potentially more important than anything else to watch how daily processing speeds fare this week. Packers are seeing boxed beef prices strengthen, which will only encourage them to figure out a way to get processing speeds back to normal sooner rather than later. But until processing speeds are running at a normal speed, the cash cattle market is likely to feel pressured.

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

(c) Copyright 2022 DTN, LLC. All rights reserved.