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More Cattle on Feed and Reduced Slaughter are Losing Proposition

Until stockers and feeders get filled up on grass cattle, and as long as Mom Nature cooperates, there should be continued auction zest for pasture cattle. At the same time, some of last week’s creeping concerns on a broader basis could apply some pressure.

For one thing, though gains in wholesale beef values are a positive, the way they were obtained causes some pause.

Analysts with the Texas Cattle Feeders Association (TCFA) pointed out Friday that the combination of cattle-on-feed numbers 3% higher on Jan. 1 compared to a year ago, and forced slaughter reduction by packers in order to boost wholesale beef values, represent a bearish proposition. TCFA analysts said in their Friday newsletter, “…a buildup in numbers and continued forced reduction in slaughter could create a situation that takes longer to clean up than what the market is prepared for.” They point out the only positive movement in the beef complex is the year-to-year gains in beef exports (more below).  

“Feedlot-bound cattle seem to be nearing a price ceiling as the fed-cattle market has stalled out and packers have cut kills to limit their immediate needs,” AMS analysts said Friday. “Recent weeks have seen the lightest non-holiday week cattle slaughter since March 2009, when a late-season snowstorm caused plant closings.”

Also heading into this week, minus major positive news over the weekend, the pall cast by Friday’s sharply lower U.S. stock market – tied to the continued lack of resolution to the Greek debt crisis – will likely add caution to markets as they begin trade this week.

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