University of Tennessee ag economist Andrew Griffith says the finished cattle market has been seeing a soft rebound following the steep declines after the Tyson processing plant fire.
“A few dollars were gained back by cattle feeders, but they are still below where they were prior to the news of the Tyson fire,” he says.
Griffith says the futures action is interesting and could signal upcoming trends.
“The story in all of this is what is happening in futures,” he says. “The August live cattle contract has regained half of its losses, but all the deferred contracts continue to be bottom feeders. The deferred contracts have failed to have any follow-through when compared to the August contract. When the August contract terminates, the October contract is likely to make some type of sudden movement since it will be the nearby contract.”
The trends in the basis should keep things moving.
“The strong basis will keep cattle moving out of feedlots,” Griffith says.
The cattle markets and beef prices continue to sort out the actual impact of the fire at the Tyson slaughter facility in Holcomb, Kansas. It had the capacity to slaughter 6,000 head a day of cattle — or about 5% of U.S. beef production — before it was destroyed on Aug. 9.
“The slaughter facility fire set a fire under boxed beef prices as there was concern that the reduced slaughter capacity may influence the short and intermediate term availability of beef items,” Griffith says. “Using weekly slaughter data, it is too early to tell if slaughter has actually slowed due to the Tyson facility being shut down. However, it appears other facilities have ramped up chain speed and running on Saturday to fill the gap.”
Griffith says he expects packers to continue running faster and harder to take advantage of the available profits. He says demand is one thing helping cattle producers.
“Maybe the one positive for cattle producers to take away from this is that beef demand is strong,” he says.