Meatpackers Enjoying Healthy Margins

05/04/21 09:00AM EDT

Below is a brief excerpt from a complimentary research note written by our Consumables analysts Howard Penney and Daniel BiolsiWe are pleased to announce our new Sector Pro Product Consumables Pro. Click HERE to learn more.

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Beef cow slaughter during Q1 was the largest since 2010. That is after Q4’s slaughter was the largest since 2011.

The trend has accelerated as the slaughter in March was the highest in any month since 2019. Last week’s slaughter was 48% higher than last year. The mix of heifers as a percent of the cattle at 37.7% on feed remains higher.

Usually, the ratio of heifers on feed must decline to retain enough to increase the size of the herd. This suggests the herd size will continue to decrease.

Even if there is some improvement in calves, there may not be enough to increase beef inventory. This is one of the impacts of higher feed prices from higher corn and soy prices.

Beef demand continues to be high, but the decrease in feeder prices suggests that packers do not have an issue sourcing supply. Feeder prices fell from $1 to $2 last week.

The spread between cash cattle and wholesale beef prices has continued to widen to historic levels. The USDA price for choice boxed beef was $298 per cwt., up to $12 from last week and $20 two weeks ago.

Beef packers are enjoying very large margins at present. For example, retail ground beef prices were up 4% in March, according to ERS/USDA data.

Wholesale prices are currently down significantly YOY due to the pandemic comparison.

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