There are plenty of events to impact the beef market — strike at JBS plant, Iran, oil prices, tariffs — but amid all of the potential impact of these events, wholesale prices have increased, indicating beef demand remains strong.
Union employees at the JBS plant in Greeley, Colo., went on strike Monday. There have been plenty of opinions about the impact of the strike on the market; I won’t get into that conversation other than to say that it will impact fed cattle plant capacity. My simplified math — the plant’s capacity is 5,400 head a day and that accounts for roughly 5½% of total weekly capacity at fed cattle plants. Taking that out of a 525,000 weekly kill would bump utilization from 76% to 83%. Again, that analysis is based on a couple of assumptions that may or may not hold, and I am presenting this as a possible impact on capacity. JBS has already stated they can move that production to other plants.
With weaker slaughter cattle prices over the past two weeks and a stronger cutout, there has been a shift in margins — significant improvement in packer margins and weaker feedlot margins. Last week’s beef packer margin was the best margin the same week in December. However, it is too early to draw conclusions. High break-evens going forward create a tedious situation for feedlots, but against those high break-evens is demand as the industry has never known.
I believe the Iran situation is likely to be concluded in the not-too-distant future, and oil prices will fall. Regarding tariffs, it seems to be a moving target.
View the full Sterling Beef Profit Tracker for the week ending March 14.
The Beef and Pork Profit Trackers are calculated by Sterling Marketing, Vale, Ore.
(Note: The Sterling Beef Profit Tracker calculates an average beef cutout value for the week in its estimates for feedyard and packer margins. Other prices in the weekly Profit Tracker also are calculated weekly averages. Feedyard margins are calculated on a cash basis only with no adjustment for risk management practices. The Beef and Pork Profit Trackers are intended only as a benchmark for the average cash costs of feeding cattle and hogs. Sterling Marketing is a private, independent beef and pork consulting firm not associated with any packing company or livestock feeding enterprise.)
