050610 Smithfield Takes Step To Solve Surplus Slaughter Problem

Cattle slaughter continues to be very light. Federally inspected cattle slaughter for the week totaled 659,000 head, down 4.5% compared to a year ago. During the first 21 weeks of the year, 12.588 million cattle were slaughtered. That is 3.3% fewer than during the same period last year and more than a million head fewer than for any year from 1995-2003. Low slaughter keeps cattle prices up; but it also makes obvious that the nation has surplus slaughter capacity. Smithfield took a small step toward solving that problem this week by announcing that they will close their Packerland beef plant in Gering, Nebraska.

Weekly average steer dressed weights have not been below year-ago levels since May of 2004. Heifer weights were last lighter than a year-ago in early April 2004. Year-to-date fed cattle dressed weights are 12 pounds heavier than in 2004. Although year-to-date cattle slaughter is down 4.3%, year-to-date beef production is only down 2.6%.

The boxed beef cutout value for choice carcasses thus far in 2005 is up 4.9% from a year ago. This isn't quite enough to compensate for both inflation and the reduced beef supply, thus it appears that domestic beef demand is down slightly. However, our cattle demand index still remains slightly higher than a year ago.

Cattle prices held steady this week. The 5-area daily weighted average price for slaughter steers sold through Thursday was $84.96/cwt on a live weight basis, up 7 cents from a week earlier, but $5.12 lower than a year ago. Steers sold on a dressed basis averaged $134.88, 24 cents higher than the week before, and $10.36 lower than the same week of 2004.

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