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Cattle, beef sector recovery continues

monsitj / ThinkStock market updates
Estimates suggest total steer and heifer slaughter two weeks after Tyson fire may be up slightly versus week before fire.

Recovery in the cattle and beef sector continues following the Tyson Foods beef plant fire on Aug. 9. Derrell Peel, Oklahoma State University Extension livestock marketing specialist, said information is slowly becoming available to provide more clarity surrounding the even and, in some cases, clear up some initial misperceptions.

“Lots of scrutiny and suspicions are being directed at cattle and beef markets,” he noted.

The U.S. Department of Agriculture announced last week that it was launching an investigation to ensure that cattle markets have remained fair following the fire.

Peel said USDA data became available Aug. 29 allowing the comparison between the pre- and post-fire impact on cattle slaughter. The data show that Monday through Friday slaughter following the fire was down 22,158 head -- 4.6% lower than the week before the fire. This reduction, he explained, is close to the estimated capacity of the closed plant. By Saturday, however, Peel said the industry was able to increase steer and heifer slaughter by 21,156 head compared to the prior week. This resulted in a net slaughter decrease of 1,002 head the week after the fire, he noted.

“Numerous early media reports indicated that estimated slaughter the week after the fire was up by 9,000 head. This was incorrect, largely because it included a large estimated increase in cow and bull slaughter and also because it was based on daily slaughter estimates,” Peel stated.

Actual slaughter data for the second week after the fire are not yet available, but Peel relayed that currently available estimates suggest that total steer and heifer slaughter two weeks after the fire may be up slightly versus the week before the fire.

In anticipation of the reduction in beef production, a sharp response was seen in cash prices for boxed beef, Peel said, with varied responses for the different beef primals. The Choice cutout peaked on Aug. 20-21, up 11.7% from Aug. 9 levels. However, Peel said cutout values have declined since then, although they were still up 7.1% on Aug. 30 compared to Aug. 9.

According to Peel, middle meat values spiked after the fire but have since declined sharply.

“Rib values peaked at 11.3% higher on Aug. 21 and have dropped back to levels up 2.4% above pre-fire levels. Loin values peaked at 13.3% higher on Aug. 20 and have dropped back to levels 4.8% above pre-fire levels by Aug. 30," he said.

End meats, Peel added, are sustaining higher levels since the fire. Chuck values peaked at 13.5% higher on Aug. 22 and were still 9.6% higher on Aug. 30. Round values, on the other hand, have maintained sharply higher levels, with the Aug. 30 value the highest so far, up 14.5% from pre-fire levels.

“These patterns of value changes confirm the complexity of beef wholesale and retail markets and the product market contortions that have occurred as a result of the fire,” he explained.

In general, USDA reported Aug. 30 that consumer demand for beef is also pushing retail prices higher.

Cattle prices this year may average about 1% higher than last year. By 2020, they could even rise by 2%, USDA suggested.

The retail Choice composite beef price for July was estimated at $6.15/lb., up from $6.00/lb. at the same time last year, according to USDA economist Seanicaa Herron.

“So, retail beef prices are on the rise,” she added.

The average beef price hike in 2019 could be 0.5-1.5%. For 2020, beef prices could stay the same or rise by as much as 1.0%.

Carcass weights rise

Peel said the actual slaughter data available now also include carcass weights before and after the fire. 

The data showed that steer and heifer carcass weights were both 3 lb. higher in the week after the fire. Still, Peel said there is no indication that possible slaughter delays pushed carcass weights higher as a result of the fire. In fact, he pointed out that carcass weights have been increasing about 3 lb. per week since the seasonal low in early June.

Overall, however, Peel said steer and heifer carcass weights were lower year over year for the week after the fire and are down 5 lb.-plus for the entire year thus far.

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