April live cattle futures closed the week at just a little over $86/cwt, the highest level since mid February. Fed cattle and feeder cattle futures posted strong gains for the week, in large part thanks to a more optimistic outlook about the future of the US economy. We suspect much of the buying that took place in the last couple of days of the week was influenced by the bullishness in equities and currency markets (vs. US dollar). Both nearby live cattle and feeder cattle futures gained some 320 points since last Monday.

Total cattle slaughter for the week was 606,000 head, about 27,000 head higher than the previous week but still 3.2% lower than last year. Packers opted to run a full production day on Friday, which accounted for the increase from the previous week. In the near term, we should continue to see very light Saturday slaughter levels. Keep in mind, however, that while slaughter numbers are running below last year’s levels, this does not necessarily mean smaller beef output. Cattle carcass weights are currently some 23 pounds or 3% higher than a year ago, offsetting almost the entire decline in slaughter numbers. Beef production for the week was down just 0.4% from a year ago.

US beef packers are trying to balance two competing demands on their business. On the one hand, poor margins due to weak prices for beef cuts and other animal parts, necessitate that they reign in output. On the other hand, they have to fill orders that were placed in the previous months. While large packers have cut back on the amount of beef that they offer out front, that is still a significant part of their business. Reducing slaughter can be a good strategy in the short term but lower plant utilization rates have their own costs.

Hog slaughter for the week continued to track below year ago. Total hog slaughter was 2.164 million head, 5.2% lower than a year ago. The decline is a little larger than what was indicated in the latest hogs and pigs report but we think the discrepancy is explained by the sharp reduction in the number of Canadian slaughter hogs. Sow slaughter rates are now running well below year ago levels as producers hold on to their most productive animals and no longer see the incentives to liquidate breeding animals.

As for broiler production, it continues to be much smaller than a year ago and broiler supplies will likely remain tight given the sharp pullback in egg sets (-6.7%) and chick placements (-7.6%).

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