Cattle Market Slaughtered

Cattle prices collapsed this week, falling the exchange-maximum for two days straight, after a major meat processing plant was closed. A Tyson Foods Inc. facility in Kansas was damaged by fire last week and will be closed indefinitely. The plant is estimated to process over 6,000 animal per day, representing 5% of all American beef.

With the major operation offline, there could be a significant glut of cattle, creating a backlog across the entire industry. As a result, slaughter-ready cattle, represented by the August live cattle futures contract, fell more than 8 cents per pound, while the August feeder cattle contract (which represents juvenile cattle ready to be put into feedlots), fell over 10 cents per pound.

The contracts for feeder cattle and next year’s live cattle deliveries recovered significantly by week’s end, while cash market cattle remained depressed, a sign that markets expect the glut to be alleviated by late 2020.

While cattle prices are sharply lower, this is unlikely to translate to cheaper beef at the grocery. In fact, the reduced national beef processing capacity is likely to raise prices, leaving both ranchers and consumers hurt by the shutdowns.