Shrinking Economy Ominous for Meat Demand

US - News of the US economy shrinking one per cent will do no favours to meat demand, according to leading market analysts.
calendar icon 2 June 2014
clock icon 3 minute read
Ron Plain
Ron Plain

Ron Plain and Scott Brown of the University of Missouri report a contracting economy, along with a billion dollar offer for a major processor.

Tyson Foods has made a bid to buy Hillshire Brands for $6.8 billion. Hillshire Brands sells meat products under the labels Jimmy Dean, Ball Park, and Hillshire Farms, writes Ron Plain.

The data from USDA's latest Census of Agriculture were released this month. This comprehensive survey of all U.S. farms said that 727,906 farms had beef cows, 64,098 farms had milk cows and a total of 913,246 farms had cattle or calves of some sort in 2012.

Compared to 5 years earlier, the number of farms with beef cows was down 4.8 per cent, the number of farms with milk cows was down 8.3 per cent, and the number of farms with cattle or calves was down 5.2 per cent. The average beef cow inventory was 39.8 head per farm.

The average inventory of milk cows was 144.3 cows per farm. The average inventory of cattle was 98.5 head per farm. There were 2,109,303 farms in the U.S. in 2012. Of these 34.5 per cent had beef cows, 3.0 per cent had milk cows and 43.3 per cent had cattle.

USDA said this week that 21 per cent of U.S. pastures were in poor or very poor condition on May 25, down 1 point from the previous week and down from 27 per cent poor or very poor a year ago.

Fed cattle prices were lower this week on heavy sales volume. Through Thursday, the 5-area average price for slaughter steers sold on a live weight basis was $144.16/cwt, down 53 cents from last week's average, but up $19.35 from a year ago. The 5 area average dressed price for steers was $230.72/cwt, down $1.54 for the week, but up $31.66 from the same week last year.

Beef prices were higher this week. This morning, the boxed beef cutout value for choice carcasses was $233.32/cwt, up $1.72 from the previous Friday. The select carcass cutout is $222.74/cwt, up $1.80 from last week.

This week's cattle slaughter totaled 537,000 head, down 10.4 per cent from the previous week and down 9.7 per cent from the corresponding week last year. The average dressed weight for steers slaughtered the week ending on May 17 was 840 pounds, up 1 pound from the week before, but down 3 pounds compared to the same week last year.

There was no Oklahoma City feeder cattle auction this week because of the Memorial Day holiday. Feeder cattle prices at Missouri auctions this week were mostly steady. This week's Missouri prices for medium and large frame #1 steers by weight were: 400-450# $227-$277, 450-500# $216-$270, 500-550# $213-$261, 550-600# $204-$247, 600-650# $194-$236.50, 650-700# $191.50-$226, 700-750# $175-$208.50, 750-800# $182.50-$195, 800-900# $167-$194.50, and 900-1000# $142-$179/cwt.

The June live cattle futures contract closed at $137.80/cwt today, up $1.50 from last week's close. August fed cattle settled at $138.60/cwt, up $1.48 for the week. The October contract ended the week at $142.60/cwt. The August feeder cattle contract ended the week at $197.05/cwt, up $4.20 for the week.

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