Compared to last week, steers and heifers sold 5.00 to 10.00 lower. Uncertainty started the week as the news spread over the weekend of a fire that has halted slaughter at the Finney County, Kansas fed cattle operated by Tyson Foods. Some cattle auctions were either downright cancelled or saw reduced receipts as the industry took in the news over the weekend. Backgrounders do like to market cattle before the Labor Day holiday in August and some may be forced to wait until the market finds footing which could be after their historical marketing time period. Cattle buyers did have bids from feedyards, however most wanted to buy at lower prices early week as they did not know when the CME Cattle Complex slide would come to an end. When the CME Cattle Complex opened on Monday morning, futures locked limit lower (-3.00 on Live Cattle and -4.50 on Feeder Cattle). Expanded limits were instituted for Tuesday; trading was down drastically again with Live Cattle down 4.47 to 4.95 and Feeder Cattle down 5.05 to 6.68. Traders did want to get some business done and they did have an opportunity to do it.
Wednesday brought expanded limits again and the more nearby Live Cattle futures were lower, while the more deferred futures were 0.60 to 1.97 higher on the day. Feeder Cattle futures appeared to need a correction and were 4.63 to 6.75 higher on the day. When the dust settled for the week, the August Live Cattle contract was down 8.58 while the next five Live contract months were down 6.05 to 8.70. Feeder cattle contracts were 4.33 to 6.08 lower on the week. The main concern that caused all the back and forth was “How will the industry try to absorb near 6,000 head per day for the foreseeable future?” Even though feedyards have been pulling cattle forward, the reduction of around 6 percent of the fed cattle slaughter capacity will put a wrench into the current marketing of fed cattle supplies.
On Wednesday, Tyson executive toured the devastated plant and vowed to get back to business in a methodical and timely fashion. A takeaway that the industry was looking for when the plant will be up and running. Company personnel were forthcoming in saying that it would be months, not weeks. As the reduction in fed slaughter happened this week, so does the meat production. Wholesalers and retailers that had been buying hand to mouth found sharply higher boxed beef values this week as the beef pipeline adjusts to the harsh reduction in production. Price jumps like this do not come along very often and will be only temporary as adjustments take place in future. For the week, the Choice cutout closed 22.32 higher at 238.69, while Select was 19.45 higher at 213.26. Processors are wanting more Choice product to sell as the Choice-Select spread now stands at 25.43.
On Tuesday and Wednesday this week, the Choice Cutout rose 7.74 and 5.98 respectively, the largest single day gains since MPR data started in 2000. For reference, the harshest daily drop of 7.26 for Choice was recorded on January 31, 2014. With negotiated fed cattle trading at 105.00 in the Southern Plains this week, packer margins have skyrocketed as some analysts are estimating they have more than doubled in one week. Cattle Slaughter under federal inspection estimated at 651K for the week, 9K more than last week and 8K less than a year ago. As last week ended, there was some volatility in the grain markets expected as USDA was set to release a large amount of grain data and reports on Monday. The abnormal growing year has been a challenge to get acres reported correctly and many surprises have sprung up along the way with the Crop Production reports this year so far. Monday’s data release was no different as corn data, which the cattle industry follows faithfully, showed a reduction in planted acres and an increase in yield which caused grain futures and cash prices to tumble. Normally lower feed cost would seem like a good thing for the cattle industry. Auction volume this week included 49 percent weighing over 600 lbs and 38 percent heifers.