Sort & Cull

Less than a month ago, the cattle market was absolutely abuzz over the impressive strength of beef demand.

The choice cut-out set an annual high on Oct. 24 at $199.38, suggesting to many that the carcass equivalent was destined to jump over the psychological hurdle of $200 faster than you could say "medium rare."

Unfortunately, something caused a major speed bump to surface on the highway of inevitability. In just a dozen business days, the value of the choice box imploded by $7.51. Talk about riches to rags.

What happened?

The easier answer seems to come with a gobble-gobble and drumsticks. Red meat sales typically struggle from late October through mid November as retailers, food managers, consumer prepare for the national feast of Thanksgiving.

At the peak of the beef market in late October, the choice box/16-22# tom turkey was 1.8 to 1, significantly fatter than the 2011 relationship of 1.65 to 1. In other words, the allure of holiday, family, and tradition was double underscored by basic economics.

Yet I think there are at least two other factors besides seasonal turkey demand at work here.

First of all, federal meat graders are signaling that choice production as a percent of total slaughter has finally bottomed. For example, the percent of fed steers and heifers in Texas grading choice or better has jumped more than four points in just the last two weeks. Over the same fortnight, the national average choice grade has popped nearly two points.

Given the way slower chain speed this fall has forced feedlots to market cattle with more days, such a dramatic increase in top-quality beef makes sense.

The second additional consideration in explaining why wholesale beef so quickly ran out of gas involves the extreme weather and destruction plaguing the East Coast. Hurricane Sandy and the wet storm that followed simply eliminated millions of mealtime opportunities, washed away demand that can never be recovered.

http://www.feelofthemarket.com/…

(AG)

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