The surge in cattle futures followed higher bids by US packers, as supplies of market ready cattle appear to be tight.

Feedlot inventories are higher but a good portion of these cattle were put on feed earlier than normal and at lighter weights, stretching out the marketing window.

Tight supplies reduced the number of steers and heifers that came to market last week. Total cattle slaughter for the week was reported at 648,000 head, 23,000 head or 3.4 per cent higher than the week before but slightly lower than the previous year.

The decline in fed cattle slaughter accounted for all of the decline. Based on preliminary data on daily slaughter, steer and heifer slaughter for the week was down 25,000 head or five per cent compared to the prior week.

The cutbacks in fed cattle slaughter and strong retail and foodservice demand for ground beef have pushed the price of fat beef trimmings (50CL) over $120/cwt., an all time record high.

Cow and bull slaughter closed for the week at 158,000 head, 1.2 per cent higher than the week before and six per cent over year ago levels.

Cow and bull slaughter is currently approaching the annual highs established back in September as the fall cow run is in full swing.

Cow slaughter rates, however, will fall off towards the end of the year as producers finalise their fall cow sales and cow barns close for the year end holidays.

This will limit supplies of lean beef grinding materials, making for an even more treacherous market for ground beef. Consumers may have shifted towards less expensive beef items, such as ground beef but prices in that complex have escalated, in part due to the absence of imported beef but also tight supplies of market ready cattle.

Cattle futures are currently trying to build weather risk premiums, with the February and April live cattle contracts trading near life of contract highs.

While live cattle futures are flirting with ever higher prices, lean hog futures were slightly lower for the week.

Higher seasonal supplies have pressured pork wholesale values lower. Particularly negative for wholesale pork prices was the weakness in the ham and belly markets. Ham values declined 3.5 per cent from the previous week even with the holiday demand in full swing while belly prices dropped six per cent.

In part this reflects the surge in hog slaughter, which jumped almost two per cent compared to the previous week and is now slightly higher than a year ago. Sow slaughter has once again picked p and it is currently hovering at 65,000 head per week, well above year ago levels and at the highest level for the year.

Sow slaughter has been running above 2010 since August despite somewhat lower feed costs and strong wholesale pork prices, implying producers remain cautious with expansion plans into next year

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