Thomas Elwood: Early livestock comments
Cash cattle traded $2.00-$2.50 lower this past week as packers used large inventories to save a bit of money. Even so, cattle traded no worse than $100.00 live, which was still up $2.00 from two weeks ago. Packer margins are very skinny right now, if not red, but slaughter was 6,000 head larger than the previous week. We think beef buyers will be even more reluctant to pay up for beef next week given the cheaper prices paid for fed cattle this past week. Showlists are expected to be a little larger this week after the slower sales. Prices could drift lower again. Even feedlot sources are not looking for much better than $99.00, which would be down $1.00 from the bulk of this week's live trade.
The choice cutout was down $0.96 at $161.30 Friday night, with the select down $0.52 at $153.44. Volume was extremely light again. The choice cutout was about flat with the previous Friday's close, but the select cutout was down over $1.00. Buyers are very reluctant to pay sharply higher for beef at this time of year when most attention turns to turkey. Sure, there will be beef features for the weekend after Thanksgiving, but we think consumers will be fairly price conscious given the weak employment picture. Pork could be the leader in the next few weeks as retail buyers take advantage of big discounts that have developed for loins and butts in recent weeks.
Cash hog bids are expected to be steady to lower to start the week. According to some hog buyers there are actually more hogs available for this week than there were for last week. Slaughter was not large enough last week to make any progress on the backlog; in fact, the situation went backwards as far as we can tell. Saturday's slaughter was only 197,000 head, which gave a weekly total of just 2.311 mill head. Until packers have the incentive to slaughter 2.35 mill head or more a week, the industry will struggle with both weights and numbers.
- The pork cutout lost $0.07. Product continues to struggle. The overall pork cutout declined over $2.00 last week, but some believe we could see the value dip closer to 70.00 before it bottoms. Heavy hams are easily available and under pressure. At some point, we expect export demand to come in and support this market. It is possible that the bump in pricing on Friday was the start of something; some think the market is looking for a bottom. We believe the belly market is close to a low as well given the strong storage demand. Loins also seemed more stable near the end of the week, though butts remain abundant.