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CME: Beef Supply Growth Creates Unease About Feedlot Currentness in Q2

13 March 2018

US - Beef supply growth has been rather muted, which has supported the value of the beef cutout but has also created some uneasiness about feedlot currentness in Q2, reports Steiner Consulting Group, DLR Division, Inc.

Total cattle slaughter last week was estimated at 597,000 head, only 0.4 per cent higher than a year ago. In the last three weeks cattle slaughter has averaged 592,000 head, 1.2 per cent higher than a year ago.

Fed cattle slaughter in the last three weeks has averaged 466,000 head per week, only 0.6 per cent higher than a year ago and lower than expected based on feedlot inventories. Average cattle weights so far have been pretty close to year ago levels.

The actual weight data released by USDA on Thursday reflects the situation two weeks ago but our analysis of cattle weights reported in the Mandatory Price Reporting shows that steer weights remain fairly close to last year’s levels.

While currentness may become an issue down the road, for now feedlot appear to be in good shape and reflected in the firm spot market.

Strong packer margins should continue to support a robust marketing rate in March, thanks in part to strong export sales but also very good retail feature activity. Feature activity for week ending 9 March was modestly behind the torrid pace set last year but sill ahead of the five year average.

It will be interesting to see how aggressively retailers continue to feature beef in the spring. Forward sales have slowed down a bit, which is cause for concern. At the same time, it appears to us that retailers and foodservice operators are intent on capitalizing on the expanding beef supply and feature more beef in order to drive traffic.

From a beef demand perspective, the +313k jobs added in February are a particularly supportive number.

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