As consumer demand shows signs of weakness, cattlemen and feedlots alike are worried about throughput this summer. One of the biggest takeaways that the cattle industry had from COVID-19 was that a backlog is easy to fall into, but it takes several times as long to dig out of.
Packers may cut processing speeds for several different reasons in the month(s) head. First, with domestic beef demand wavering, it financially doesn't make sense to run aggressive slaughter speeds when boxed beef prices are running into resistance.
Boxed beef prices hit record highs in spring of 2020, but since then beef prices have maintained a higher price point than in years past. But with the economy suffering and consumers finding it hard to stretch their dollar, beef prices show some weakness.
Second, packers have a managing game to play in the months ahead. Currently the market sits with record numbers of cattle on feed, but with drought and poor profit margins forcing ranchers to liquidate at levels not seen since in the 1980s, there are also fewer feeder cattle outside the feedlots which will bode well for sellers down the road. Packers know that the market favors their position for now, but when the current cattle on feed get worked through, the cash market is going to drastically change to favor feedlots. The longer that packers can keep cattle on feed and in feedlots will push the time in which supplies favor feedlots later down the road, again highlighting the likelihood of packers easing processing speeds.
Last week's negotiated cash cattle trade totaled 90,683 head. Of that, 73% (66,368 head) were committed for the nearby delivery, and the remaining 27% (24,315 head) were committed for deferred delivery. It was surprising to see packers buy that many head, given than in the previous three weeks they had boughten more than 300,000 head, of which plenty were committed for deferred delivery. In this upcoming week's cash cattle market, feedlots know that it's going to become tougher to hold the market at steady levels and that packer interest could die at any second, turning the market into a ghost town.
ShayLe Stewart can be reached at email@example.com
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