Thursday, 3 September 2020
US and Canadian cattle slaughter appears to be recovering following COVID-19 disruption, although backlogs remain. Domestic prices and export volumes will be determined by how demand and economies recover, both globally and domestically.
Production & prices
According to industry reports, weekly cattle slaughter capacity in the US has largely recovered to pre-coronavirus levels. Data from the USDA shows that weekly beef production in the US seems to have recovered quickly from the lows seen in May, and is now running at around 2% above last year’s levels. Production has been bolstered by heavier carcase weights, as those cattle that were waiting on feed due to processing capacity issues are now coming forwards. Cattle slaughter for the year to the end of August was down nearly 5% year-on-year at 21 million head.
The recovery in slaughter and production has meant that US wholesale prices have returned to more normal levels, with the weekly comprehensive boxed beef cut-out price back to around $210/cwt (£2.80/kg) in the week ending 31 August. Weekly farmgate steer prices rebounded in June but fell again in July to below $100/cwt. They have since risen to be in-line with last year’s price; however, this is below the five-year average. Reports suggest that uncertainty over demand during the autumn is weighing on futures.
Similarly in Canada, slaughter rates appear to have recovered strongly following lows in April and May, caused by coronavirus outbreaks in processing plants. Industry reports suggest that slaughter has recovered strongly, but there remains a backlog of cattle to clear. According to Statistics Canada, total cattle slaughter for the first six months of 2020 was back 9% on the same period in 2020.
As with the US, the recovery of slaughter capacity has supported cattle prices, but prices still face pressure from lower foodservice demand and the plentiful supplies of cattle in the system.
US beef exports (incl. offal) for the first six months of the year were down 9% from 2019 at 564,900 tonnes. Shipments have been struggling particularly during May-June, reflecting coronavirus-induced disruption of meat production, foodservice, and the economies of major importers. During the period, volumes fell to most key markets, but were higher year-on-year to Canada, China and South Africa. Industry reports suggest that a cheapening of the US dollar will have provided some support to exports.
Canadian beef exports (incl. offal) for January-June were down 13% year-on-year at 188,800 tonnes, mainly due to lower trade into the US and China. Exports of live cattle and calves into the US were also down 10% during the period, due in part to coronavirus disruption at US plants, causing backlogs and reducing demand for Canadian imports. Exports of beef recovered somewhat in June, helped by increased shipments to the US, however volumes were still down in relation to last year.
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