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During the first week in January, the Choice-over-Select premium was over $15 per cwt, but has since
declined somewhat. As a result, carcass prices are 6 percent over year-ago prices. Beef production and
cattle slaughter through mid-January was running about 2 to 3 percent below a year earlier.
Consistent with cowherd inventory building, cow slaughter was down about 6 percent for 2005,
compared with 2004. Although fourth-quarter cow slaughter is only down about 3 percent, it is sharply
below 2003 levels. Similarly, 2005 heifer slaughter was about 6 percent below 2004 slaughter, and fourth-
quarter slaughter was nearly 7 percent lower. These indicators will be born out as the January 1 inventories
are published, indicating further inventory building. Calves from these inventory-building efforts will not
begin exiting feedlots as fed/slaughter cattle until 2007. Thus, any significant increases in beef production
will have to come from heavier slaughter weights, feeder cattle imports from Canada and Mexico, or fed
cattle imports from Canada, all of which are dependent on adequate crop and pasture conditions during the
remainder of 2006.
Calf slaughter, mostly made up largely of dairy steer calves, is about 17 percent below mid-January 2005
levels. Calf slaughter weights, averaging 40 to 50 pounds (about 14 percent) over January 2005 levels, are
helping to maintain veal production at levels only about 3 percent below this time in January 2005. The
number of bob veal calves slaughtered (those calves usually slaughtered at less than 150 pounds) is about
33 percent lower than year-earlier levels, while formula-fed calf slaughter (those calves usually fed to 300
to 450 pounds) is about steady with last year. These factors suggest more veal calves are being shifted to
pasture or other backgrounding situations as feeder cattle eventually headed to feedlots, as is often the case
when feeder calf prices are relatively high.
With the beef industry moving past the holiday season, retail markets are settling into more typical
patterns. Retail prices for Choice beef continue to strengthen from late summer lows set in September at
$3.92 a pound. Prices averaged $4.06 in December with fourth-quarter 2005 retail prices averaging $4.02,
still nearly 1 percent below a year earlier. There are indications, primarily in the form of boxed beef prices
averaging above last year, and narrowing wholesale-to-retail price spreads, that retail prices could be higher
yet, particularly if higher grading cattle supplies continue tight. Large supplies of competing meats at
relatively lower prices, particularly broilers, are also expected to pressure beef prices along with larger beef
and total meat supplies in 2006.
Source: USDA/ER
E-mail: sflanagan@sprintmail.com |
