CME: Winter Weather Affecting US Meat Plant Operation

US - The major storm that covered much of Colorado, Nebraska, Kansas and the upper Midwest in snow early this week caused several meat plants to shut down on Tuesday, write Steve Meyer and Len Steiner.
calendar icon 5 February 2016
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A Tyson spokesperson said three of their six pork plants were not operating on Tuesday, with the affected plants in Iowa and Nebraska.

Additionally, one of Tyson’s beef processing facilities did not operate and two others were scheduled to run reduced hours, those were in Iowa and Nebraska.

Cargill said one of its beef plants in Nebraska did not operate on Tuesday due to winter weather, and Smithfield Foods would not comment on their daily activity.

Reports indicate that most plants will make up lost time by adding hours later this week or increasing Saturday slaughter levels. However, the total impact on Tuesday left estimated daily cattle slaughter at 77,000 head compared to 112,000 a week ago and 113,000 a year ago.

Estimated daily hog slaughter for Tuesday was 305,000 head compared to 440,000 a week ago and 437,000 a year ago.

Tuesday’s slaughter levels were revised on Wednesday’s report by USDA-AMS.

Wednesday’s estimated slaughter levels came in at 98,000 for cattle, compared to 109,000 a week ago. Estimated daily hog slaughter for Wednesday was 395,000 compared to 438,000 a week ago.

The storms mostly disrupt the ability to transfer hogs from barns to the plants, but since the hogs are raised in barns the storm will have little impact on those weights. Conversely, we can expect to see a downward adjustment in cattle weights as cattle in feedlots deal with winter weather then mud aftermath.

Seasonally however, as we look at cattle slaughter and weights, there is a normal trend of fewer head slaughtered in February compared to January, and weights should continue to get lighter through May.

Even with winter weather, the potential of cattle weights to track below year ago numbers may not be probable until the second half of 2016.

On the beef side we do not think this recent major storm will cause much of a market shock in term of supplies and prices.

This is largely because we are not in the peak of beef demand and plants will likely recoup lost time later in the week. Cattle futures seem to agree right now, although they were cautiously optimistic most of the day Wednesday.

On Wednesday USDA-AMS published their weekly Oklahoma City Auction report which detailed feeder cattle traded $1-$3 lower compared to last week and calves were steady to down $3.

According to the Cattle Inventory report we still have an elevated level (compared to 2015) of feeder cattle supplies out in the country, and we expect feeder cattle prices to trend steady to lower in the coming months with heavier placements into feedlots the second half of 2016 due to previously delayed placements.

Fed cattle trade has been very limited so far this week, we will wait to see which way it moves on Friday.

Boxed beef prices were up day-to-day Monday, Tuesday and Wednesday ending the day up $0.10 to $222.47 per cwt.

Volume movement of boxes has not been anything to brag about, however this may also be linked to winter weather. Seasonally boxes usually hit their low price the middle of February, we will have to see how the next couple weeks play out to determine if this storm had enough of an impact to cut that cycle short.

Weather is often overlooked in livestock markets, but it can have significant impacts and produce major changes that reverberate through the market. If we get another big storm in cattle country, we will continue to see it impact weights and beef production.

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