November 19, 2007

 

Slaughter cuts escalate choice beef cutout values

 

 

Choice beef cutout values climbed $6.32 per hundredweight in eight business days beginning November 2 as packers trimmed slaughter rates from the aggressive pattern seen just prior to the rise, market analysts and economists said.

 

Choice cutout values, as reported by the US Department of Agriculture, bottomed at $137.98 on November 2, the lowest levels since April 6, 2006. They then rose to $144.30 on Wednesday, the USDA said.

 

Ron Plain, agricultural economist at the University of Missouri, said the reason for the gain were the exact opposite of what took the price to its low - slaughter rates.

 

In late October and early November, beef packers became aggressive about their slaughter rates, Plain said. They were competing for market share, and many tied it to an effort by JBS Swift to increase efficiencies by increasing output.

 

As a result, other packers had to compete for available fed cattle and push extra product into the beef pipeline to retain market share, Plain said.

 

But about the time boxed-beef prices turned higher, slaughter rates went down again as packers tried to support beef prices, he said.

 

A market analyst for Futures One, Dick Quiter, said retail buyers also stepped in on the price floor because prices had become very attractive for booking December and even January needs.

 

Other market analysts said packers weren't willing to book product into January at those low prices, however.

 

Sterling Smith, vice president of Futures One, said some of the gain may have come from increased export interest, even if there were no extra sales. Nov. 7 was a day when the currency markets got very active, and the US dollar sank to new lows, he said.

 

But when the US dollar gets beaten up in currency markets, it's bullish for commodities, including beef, because they become cheaper for foreign buyers, he said.

 

Currency markets have since settled down, but so has the bullishness in the beef markets, Smith said.

 

Hog markets remain oversupplied, traders said. Prices are moving lower, and producers are losing large sums of money.

 

And the end seems nowhere in sight, traders said. Holiday weeks will only serve to back hogs up on the farms and create more of a demand for the packers' slaughter services.

 

Most traders said they see no change in the hog markets until early next year.

 

CATTLE/HOG SLAUGHTERS
 

US cattle slaughter for the week was estimated at 644,000 head, compared with 637,000 a week ago and 660,000 a year ago. Year-to-date slaughter stands at 29.876 million head, up 1.3 percent from a year ago.

 

Year-to-date hog slaughter is estimated at 94.422 million head, up 3.5 percent from a year ago.

 

TOTAL MEAT PRODUCTION
 

The USDA estimated total beef, pork and lamb production for the week at 992.3 million pounds. Last week's output was 987.2 million, and the year-ago figure was 956.1 million. Year-to-date combined meat output is 42.297 billion pounds, up 2 percent from last year.

 

Broiler/fryer slaughter for the week was estimated at 169.962 million head, compared with 168.915 million a week ago and 166.315 million a year ago.