Packer Cattle Purchases
The fire at the Tyson beef packing facility in Kansas and the subsequent movements for cattle and boxed beef prices along with soaring packer margins has brought about renewed attention on the competitiveness of cattle markets.
USDA’s mandatory price reporting system collects data on the prices paid for cattle along with the arrangements under which the cattle are secured. The August 21st edition of The Daily Livestock Report (DLM), distributed by Steiner Consulting Group, summarized the data reported by USDA for the week ending August 16, the week following the Tyson fire.
According to DLM, the number of packer-owned cattle slaughtered that week equaled 11,075 head, higher than last year, but about 43 percent less than the five-year average for the week. Packer-owned cattle accounted for 2.1 percent of the fed cattle slaughtered. For the same week, forward-contracted cattle amounted to 12.1 percent of the cattle reported in the system, higher than last year’s 6.3 percent, but still within the range over the past five years. DLM also noted that 19 percent of the cattle reported in the system were traded on a negotiated basis. In contrast, 2 percent of the hogs reported in the system for the same week were traded on a negotiated basis.
DLM offered this assessment of the cattle market this fall, “Faced with more demand to book beef forward from end users, it makes sense that packers have relied on forward contracts to hedge their risk. . . More cattle contracted on a forward basis than last year and tighter packing capacity could limit the upside in the cattle market this fall.”
