Beef By-Product Values Still Dropping

Beef by-product values continue to decline, pinching packer returns on slaughtering and processing cattle, which, in turn, is helping to pressure bids for slaughter-ready cattle.

As of last week, USDA data show the average value for the total of hides, fat and internal organ meats at $10.41 per cwt, $4.81, or 31.6%, below the $15.22 value a year earlier and $2.25, or 17.8%, behind the $12.66 average of the previous five years.  Last week’s value was even $0.13, or 1.23% below last year’s low of $10.54, seen the last week of December.

The decline can be linked to a rise in the value of the US dollar since most of these products find their best markets overseas.

 

US DOLLAR INDEX

 

The US dollar index, a comparison of the US dollar value to a basket of other currencies, began to rise in earnest in 2011 after hitting its weekly low in April at 72.86.

From there, the index rose to a monthly high of 100.71 in March of last year, a gain of 27.85, or 38.2%.

As the US dollar rises, it makes US products more expensive, and since the US doesn’t process the bulk of the cattle hides it produces or consume the bulk of the internal meats, prices for these items must decline in order to attract foreign buyers.

 

RELATIVE VALUES

 

USDA Foreign Agriculture Service data through 2014 show the average annual value of US hides and skins declining to a record low in 2009, right after the Great Recession hit, at $818.6 million.  Hides and skins make up the largest percentage of the total hide and offal value of cattle.

However, if 2015 preliminary weekly hide and offal values are added to the FAS data table, US values would be $667.03 million, a new record low.

The record annual high for cattle hides and skins was $1.576 billion, set in 2014, and the 2010-2014 period was particularly good for hide values, which pushes the average line on the graph higher.

Variety meat export values also set a record high in 2014 at $837.8 million, according to the FAS.  This compares with the low of $401.3 million, also set in 2009.

For comparison, beef and veal muscle cut exports through November of last year totaled $5.007 billion, down about 13% from $5.732 billion a year earlier.  Full 2014 beef and veal exports were valued at $6.298 billion.

 

CASH CATTLE QUIET

 

Cash markets Wednesday day remained quiet with no packer bids.  Asking prices were reported at $142 per cwt on a live basis and $216-$220 on a dressed basis.  Cattle traded last week about $4 higher at $138 live and $210 to $212 dressed, up $8 to $10.

Some analysts report that travel problems in the Plains and western Corn Belt hampered slaughter and processing so much that some of the scheduled production may carry over into next week.  This could limit packers’ buying needs this week and cap prices.

The USDA reported slightly higher wholesale beef prices Wednesday, with choice up $0.10 per cwt at $222.57, and select up $0.39 at $218.02.  The choice/select spread narrowed to $4.55 from $4.84 Tuesday, and there were 103 loads of fabricated product sold into the spot market.

The USDA reported moderate demand and offerings for beef, ribs, rounds and loins were steady to firm while chucks were steady to lower.  Trimming trade was very light, and price trends were not established.

The CME Feeder Cattle Index for the seven days ended Tuesday was $160.14 per cwt, down $0.14. This compares with Mar’s Wednesday settlement of $157.95, up $0.10.