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CME: Latest Data on Fed Cattle Weights a Shocker

22 May 2017

US - The latest data on fed cattle weights was a real shocker, reports Steiner Consulting Group, DLR Division, Inc.

The latest report covers the period 30 April - 6 May (two week lag in reporting) and it shows the following: steer dressed weights for that week were on average 832 pounds, down 15 pounds from the previous week and 30 pounds lighter than they were during that same week a year ago.

The 3.5 per cent decline in weights has a direct impact on total amount of beef pounds coming to market and a disproportionate impact on the amount of fat beef available (lighter cattle will generate less fat trim).

The decline also helps explain the widening choice/select spread. For the week ending May 6 steer slaughter was reported as 333,976 head implying a total beef production for the week of 277.9 million pounds.

Last year, steer slaughter was 335,800 head but on average those steers yielded an 862 pounds carcass and a total beef production of 289.5 million pounds. So you have a shortfall of about 4 per cent in total pounds coming from fed steers at a time when the retailer has this stuff on sale and retail ground beef prices are at the lowest point they have been in about five years.

Heifer weights also showed a similar decline. USDA pegged average heifer weights at 769 pounds per carcass compared to 801 a year ago, a 32 pound or 4 per cent decline. There were 16.4 per cent more heifers that came to market during the week than last year and this added to overall pounds even as weights were down.

Still, combined steer/heifer (fed beef) production for the week was just 403 million pounds, only 0.4 per cent higher than it was last year. The numbers are also surprising because they deviate so much from what we have been seeing from the Mandatory Price Reporting numbers.

We have derived a series of weighted average steer weights from the MPR system, using steers priced on negotiated and net formula basis. It is a significant sample and generally it has an R2 of almost 96 per cent with the actual data that USDA reports. Based on that model, weights for the week of 6 May should have been around 849 pounds, instead they came in at 832.

But we have seen outliers like this before, specifically during the market turmoil in September 2015. The reason likely has to do with the data going into our sample, which do not seem to capture extreme market events. As for the choice-select spread, it has exploded in the last few weeks as market participants struggle to find high quality beef now that green cattle being pulled forward.

The increase also reflects increased promotions of choice beef at retail going into the grilling season. Last year choice beef premiums declined sharply in the fall as weights increased and demand softened. How quickly cattle weights recover will dictate the direction for choice premiums.

Further Reading

You can view the full report by clicking here.

Daily Livestock Report - Copyright © 2008 CME. All rights reserved.

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