Beef Market Update: Cut out price declines, as kill levels begin climb to near-average

As RealAgriculture’s Shaun Haney puts it: the interesting, fascinating beef market continues.

Currently, there’s huge separation between the June live cattle futures and the cash price, with many taking bets on how that gap closes. Bulls believe there is pent-up demand while bears see a weak economy and restricted demand for the most expensive cuts, impacting profitability and product movement.

Anne Wasko of the Gateway Livestock Exchange has been predicting the cash price in the U.S. will float down as more slaughter capacity comes online.

The week started off quite solid in the U.S., with southern trade up in the low-to-mid teens, but as Wasko notes, that has quickly changed.

“There’s quite a bit of trade by the end of the week at that $105 level. I haven’t seen the weekly average for the U.S. yet but I’m guessing we could be down six or seven dollars from last year. So that convergence, now that we are into June, is occurring, and I think that continues to transition going forward over the next few weeks,” she explains. “I suspect it will be a little meeting in the middle, where June live cattle sits today and this current cash that we are seeing today.”

In Western Canada, this week was pretty solid, with an average around that $150 mark, putting it six or seven dollars higher than the previous week.

“We had some good support dressed in that $250 to $255 area, so that kind of set the tone for the week,” says Wasko. “I think the good news here — on both sides of the border, but certainly here this week — for last week’s kill, there’s a big step towards pretty much on target for the kind of kill levels that we would’ve been experiencing this time last year. Nationally, we saw over 50,000 head of cattle processed last week in Canada.”

Now that we are inching our way back to a regular kill schedule in the U.S. and Canada, many cattle producers are asking: what is the next step? What happens next?

“When you kill cattle pretty much close to normal to a regular schedule, guess what is happening to our cutout wholesale price? It has been an absolute free fall — as we expected — (and) we saw $265 choice cutout. That’s over $100 lower than a week ago,” Wasko says, adding that even though we were seeing over $400 a few weeks ago, those were all-time highs, and not where we regularly would be at. “$265 is kind of where the previous highs had been. So we’re back to this level, and I think you’re going to continue to see that cutout chopped back as we head into summer, with bigger kills, and bigger beef supplies because of bigger carcass weights.”

Check out the full Beef Market Update with Anne Wasko, below:

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