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CME: US Cattle Slaughter Running High

04 August 2016

US - Year to date, total cattle slaughter is running 4 per cent above year ago levels, write Steve Meyer and Len Steiner.

Total cattle slaughter is a mix made up of heifer, steer, beef cow, dairy cow, and bull slaughter. USDA-AMS and NASS report the Federally Inspected (FI) numbers for these categories. Here we will look at the trends, and their implications, of heifer, steer, and beef cow slaughter.

Starting with heifers, year-to-date heifer slaughter is down 2 per cent. However, for the past five out of six reported weeks, heifer slaughter has registered above year ago levels.

This indicates the slowdown of heifer retention into beef herds, based on management decisions made at the cow-calf level 4-8 months ago, largely driven by four consecutive quarters of year-over-year lower cattle prices.

We do expect this year’s heifer slaughter level to exceed 2015’s, on an annual basis. Monitoring this number as we progress towards fourth quarter will be telling for national beef herd growth expected as of January 1, 2017.

An additional factor that will impact national beef cattle inventory is beef cow slaughter. Year-to-date beef cow slaughter is up 9 per cent compared to 2015’s.

Beef cow slaughter has been above year ago numbers 22 out of the 28 reported weeks so far this year. This is largely in line with expectations, as the industry returns to a more “normal” culling rate as opposed to holding more cows back for a longer period of time (as happened in 2014 and 2015).

We expect this trend to continue for the duration of 2016 and throughout 2017. Steer slaughter has been the really impressive number so far this year. Year-to-date steer slaughter is 7 per cent above 2015’s and has been above year ago numbers 26 out of the 28 reported weeks.

Additionally, steer slaughter has posted gains over the previous five year average (2010-2014) for about half of the reported weeks, to total about even with the five year average sum year-to-date.

This increased slaughter level has made the cattle feeders extremely current. Looking at the impressive pull through of fed cattle, especially steers, it makes you wonder about the movement of cattle the rest of the year.

Of course, from placement numbers in the monthly USDANASS Cattle on Feed report, we know as of July 1 we were carrying an on feed inventory about 1 per cent higher than year ago.

While we only have steer slaughter data through the second week of July, we know preliminary total cattle slaughter levels have stayed high into August meaning, we have heavily pulled cattle out of our on feed inventory.

This could give some price support to fed cattle down the road via a tightened supply at the feedlot level and also to feeder cattle prices as on feed inventories are replenished.

 


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