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CME: Market Participants Debating Over Level of Retail Beef Demand after Holiday Season

05 December 2017

US - Despite deteriorating margins, beef packers were quite aggressive in purchasing/slaughtering cattle last week, according to Steiner Consulting Group, DLR Division, Inc.

Demand for beef ribs normally peaks in early December and it appears that packers still have a few orders to fill for the holidays. Fed cattle slaughter for the week was estimated at 517,000 head, 5.1 per cent higher than a year ago.

In the last five years the average fed slaughter for this time of year has been 437,000 head. At this point this is still just an estimate but, if correct, it would be the third largest slaughter week for the year.

Fed cattle slaughter declines at the end of the year due to holiday shortened weeks. The combination of lower slaughter and strong retail demand for end cuts for post holiday business normally supports the cutout late in the year and in early January.

The debate among market participants at this point is about the level of retail demand after the holidays are done. There are conflicting signs in that regard. Forward sales have been trending lower in recent weeks. And prices/supplies of competing meats point to very strong competition in the retail meat case.

However, all year long we have seen beef demand defy expectations. The economy is in good shape, unemployment is low and the consumer appears willing and able to pay for beef. At this point futures market participants look to be cutting back some of their bullish bets until they get a better sense as to how demand will play out in January.

Last year, the beef cutout came under pressure early in the year, providing an opportunity for retailers and foodservice operators to plan large beef features before Easter and then again for Memorial Day.

Steer weights are currently well under year ago levels and the high marketing rate should keep weights below year ago levels into Q1. Lighter weights will tend to offset the larger number of cattle that is currently coming to slaughter as well.

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

TheCattleSite News Desk

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