Live cattle markets continue to be pulled in different directions, seeing a variety of factors at work this spring. Andrew Griffith, ag economist with the University of Tennessee, is watching live cattle futures as well as trends in slaughter rates.
“Live cattle futures are going to have to chase down cash prices as they have accelerated the past couple of weeks while the June live cattle contract is stagnant comparatively speaking,” he says in his weekly market update.
“It is understandable for there to be a gap in cash prices and the futures market since it is not June, but the basis is just too large right now. There are still a lot of skeptics that think finished cattle prices will continue to falter, but the market is demanding meat protein.”
Griffith expects feedlots to continue doing as much marketing as possible given the current situation.
“There is no way to guess what will happen to finished cattle prices, but feedlots will continue to market as many cattle as possible with the strong basis and backed up cattle,” he says.
Cattle slaughter numbers began the year running high, but then dipped sharply.
“The main story from a meat perspective is the daily and weekly slaughter levels,” Griffith says. “Cattle slaughter the first quarter of the year exceeded 621,000 head every week except the first week of the year. There was even a week when cattle slaughter nearly reached 685,000 head just prior to April. Slaughter levels then declined rapidly as facilities closed or reduced harvest levels in the middle of April.”
The decline in slaughter has had a variety of impacts on prices.
“Slaughter levels on a weekly basis fell to about 425,000 head the last week of April and starting into May,” Griffith says. “The rapid decline in cattle slaughter is primarily due to reduced fed cattle slaughter which is why finished cattle and feeder cattle prices plummeted.”
Not all classes have been impacted evenly, Griffith says. Also, there are signs that slaughter levels are slowly building back up.
“Alternatively, slaughter cow and bull prices have remained relatively strong in that the slaughter level of this class of animal has not declined to the same extent as finished cattle,” he says. “Given finished cattle slaughter values from last week and the daily estimated slaughter for this week, it would appear slaughter levels are slowly increasing. The slow increase is a positive sign, but it means cattle continue to back up in the feedlot.”