Call the Market

With markets flooded with plenty of outside noise and chaos largely thanks to our economy's unnerving state, the cattle market has been on edge lately. Sure, prices are still high historically speaking. But it's almost as if all the market participants have begun to hold their breath, waiting for something to tip the apple cart.

And while big-ticket items like a potential government shutdown or interest rate spikes demand our attention immediately, there are also smaller subtleties happening throughout the market daily that should demand our attention as well.

One of those subtleties that has gotten little attention through 2023 is the effect of the decision to run lighter slaughter speeds.

Thus far through 2023, based on the estimated weekly slaughter data, processing speeds have averaged 622,395 head per week. Which is the smallest estimated weekly harvest the industry has seen in the last five years excluding 2020. In 2019, processing speeds averaged 627,641 head per week (5,246 head more per week than thus far in 2023). In 2020, the year of the COVID backlog, processing speeds averaged 607,769 head per week. In 2021, processing speeds averaged 634,487 head per week (12,092 head more per week than thus far in 2023). In 2022, processing speeds averaged 647,026 head per week (24,631 head more per week than thus far in 2023).

From a packer's perspective, it makes perfect sense to run slower processing speeds to reduce the number of cattle they need in a tight-supply market. But the ramifications of slower processing speeds haven't just lessened packer dependence on the cash market, it's also tightened beef supplies to consumers and driven carcass weights higher.

The week before last, Thursday's actual slaughter data showed for the week ended Sept. 9, 2023, steers averaged 917 pounds -- which is the second all-time-highest carcass weight for the week. Second only behind 2020, when steers averaged just one pound more at 918 pounds.

At this point, I hope your mind is racing.

First, I hope you're realizing that no small change in the market can go overlooked, not even in years when prices are high -- or even historical.

Secondly, I hope beef demand has crossed your mind. Thankfully consumers have continued to spend their hard-earned dollars on beef despite it being an expensive protein; Lord help us if that reality changes.

And last, I for one, am concerned long-term about these carcass weights. How can our cattle be one pound behind the industry's all-time high seen in 2020 when cattle were backlogged for months? What's going to happen when the U.S. cowherd is rebuilt and supplies of market-ready cattle overwhelm the market? If we rebuild to the number of cows obtained in 2017-18 with genetically bigger cattle, the market isn't going to just be oversupplied, it's going to be painstakingly oversupplied, and prices are going to reflect just that.

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

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