Prepared and written by Jeff Swenson, DATCP Livestock and Meat Specialist. The Market Update draws information from several sources, including trade publications, radio broadcasts, agricultural news services, individuals involved in the industry as well as USDA NASS and AMS reports.
Negative news has taken the wind out of the beef sector’s sails, along with much of the optimism we’ve seen for much of the year. Even a somewhat bullish Cattle on Feed report Friday was overshadowed and barely mentioned by Monday morning. Tyson announced late last week it will shudder its Lexington, Nebraska beef plant. The facility, which opened in late 1990, has a 4,400 head/day capacity and employs over 3,000 people. The closing reduces harvest capacity in Nebraska by 15%. The industry is experiencing excess shackle space, but losing a processor is still cause for concern. Additionally, Tyson announced it will convert its Amarillo, Texas, beef facility to a single, full-capacity shift. This will reduce that plant’s capacity from 5,500 head/day to between 2,700 and 2,800. Packer margins have improved over the past three weeks. However, it’s estimated they have been losing an average of $200/head.
An executive order eliminating the 40% tariff on some products from Brazil will likely open the door for more beef from the country being imported to the U.S. Brazil had been on track to be the top supplier of U.S. beef imports this year before the tariffs were put in place. Most of the beef purchased from Brazil is lean and lean trimmings to mix with fatter trim from U.S. cattle. Between 40% and 45% of the beef consumed domestically is ground beef. Beef cow harvest is running 18% below last year. Therefore, the supplies of lean trim here are limited. To make 85% lean ground beef, it takes seven pounds of 90% lean trim for every pound of 50% trim. USDA reported the price a lean trim price of $4.02/pound last week and a 50% lean price of $1.60/pound.
Cattle futures were already under pressure. However, given those two headlines, both Feeder Cattle and Live Cattle futures opened limit down Monday. Further complicating the market are rumors that imports of Mexican feeder cattle could start as early as December. USDA has made no official announcement, however.
Negotiated fed cattle trade was $7/cwt lower last week making it $25/cwt lower than in early September. The Choice beef cutout value averaged $371.27 last week, $3.78 lower than the previous week. As expected, harvest was up, estimated at 585,000 head, which was 9,000 more than the previous week but 50,000 fewer than a year ago. The number of cattle in feedlots on November 1 was 11.7 million head. This was 2% less than last year according to the Cattle on Feed report. October placements were 10% lower than last year. Thus, making it the lowest October placement total since the report began in 1996. Heifers made up 38.1% of the feedlot inventory, 1.6% less than last year. The percentage would need to be below 35% to indicate widespread heifer retention.
