The slaughter pace last week was the best we’ve seen in 2022, with an estimated Federally Inspected total of 659K. Given the previous week’s disappointing pace due to weather, these are very promising totals.
Considering the production factors of the past two years, it’s logical to consider that advances in carcass quality, or higher marbling scores, will be less likely to develop in 2022 than in the previous two years.
Regardless of the market examined, “uncertainty” is an accurate descriptive term. U.S. equities are unsettled despite a promised interest rate hike and that spills over to cattle and beef.
The USDA January 1 cow herd inventory, published this Monday, confirmed a 2% decline in the beef cow herd, along with a 1% decline in feeder cattle supplies.
Fed cattle markets have seen challenges in January. The Omicron variant is pressuring packing plant efficiency through increased worker absence, resulting in much smaller slaughter totals so far this month.
Cattle and beef market dynamics the past year were nothing if not volatile, and in some ways, unprecedented. Supply chain imbalances and processing sector issues have been the focal point of beef price inflation.
December has started off on a high note in the fed cattle sector and all of us on the cattle side of the supply chain should be made well aware of what’s ahead in 2022.
Packers have margin to spread back upstream to the feedlot sector at their discretion, and it appears that their need to fulfill orders for high-quality product for upcoming holidays is likely a motivating factor.
All parties upstream of the packing sector are elated, and likely relieved, to see the price break free from the furrow between $120 and $125/cwt that the fed cattle trade had been digging for 19 weeks.
The fourth-quarter seasonal price pattern over five years has seen a 12% increase from September through year end. Weekly carryover must shrink before packers see a supply incentive to move bids significantly higher.
