Cattle futures tottered mostly lower on Monday, pressured by last week’s lower cash fed cattle trade, follow-through selling and month-end position squaring.
Wholesale beef values continued to firm. Choice boxed beef cutout value was 47¢ lower Monday afternoon at $205.75/cwt. Select was $1.02 higher at $197.84.
Live Cattle futures closed an average of 52¢ lower (25¢ to 90¢ lower).
Except for 12¢ higher in spot Aug and 27¢ and $1.02 higher at the back, Feeder Cattle futures closed an average of 53¢ lower (37¢ to 80¢ lower).
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Major U.S. financial indices closed mostly narrowly mixed on Monday, while strong quarterly earnings reports and stable oil prices helped lift the Dow.
The Dow Jones Industrial Average closed up 60 points. The S&P 500 closed 1 point lower. The NASDAQ closed 26 points lower.
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Even though packing capacity today is less than a few years ago, it should be enough to keep up with expanding cattle numbers, at least for the time being, according to Derrell Peel, Extension livestock marketing specialist at Oklahoma State University.
Peel explains that U.S. packing capacity declined from 2012 to 2106 with the close of one major packing facility along with some smaller ones.
“Published estimates of slaughter capacity suggest that capacity utilization (average daily slaughter as a percent of slaughter capacity) increased from 79% in 2012 to 83% in 2016 for the top 20 beef packing plants,” Peel says, in his weekly market comments. “The average daily federally inspected slaughter level in 2016 was 95,913 head with a maximum daily level of 117,978 head on November 10, 2016. That was the only day in 2016 with slaughter above 117,000 head. This compares to five years earlier in 2012 when the average daily slaughter was 103,580 head and there were 225 days with slaughter above 117,000 head, including 205 days with slaughter exceeding 120,000 head.”
So, Peel says, “Slaughter capacity could become a factor at some point with continued herd growth, but it is unlikely to be a significant issue for the foreseeable future.”
In the meantime, labor constraints could prove more challenging. In other words, the raw capacity is there, but there has to be enough labor to run added daily and weekend shifts as necessary.
CattleFax analysts noted in their 2017 Industry Outlook in February, “Adequate processing capacity has been a major issue in the pork and beef industries in 2016. The available supply continues to outpace facility growth, and this will remain a challenge for market participants during peak market cattle and hog supplies the next few years.”