Weekly choice wholesale beef prices are at a decision point after trending lower since Jan. 1 as supply and lackluster domestic demand combine.
The decision point comes as the USDA Agricultural Marketing Service’s boxed beef cutout value often turns higher this week. At least it did last year along with the 2011-2015 average.
Last year, the choice boxed beef value made a seasonal bottom of $213.84 per cwt last week and then bounced to $216.51. In four weeks, the cutout topped at $231.77, its second highest point in the year.
The previous five-year average bottomed last week at $197.63 per cwt, only to bounce to $201.22 the following week. It then made a cycle top of $212.44 in five weeks. From there, the average moved sideways into early July where the market became more volatile.
Last year, after hitting the second highest point in March, the choice beef cutout faded into mid-April where it bounced again but began a slide to annual lows in October.
END CUTS OFFER MOST PRESSURE
Since it is winter, traditional thought follows that middle meats are offering the most pressure to the choice beef cutout. However, this is not the case, as data shows it is the end cuts, most notably the chuck, that offer the most pressure, especially when supplies are running strong.
USDA/AMS data shows the 2011-2015 average of chuck roll prices tends to be volatile at this time of year until mid-March.
It must be remembered, though, that the average takes into account the end years of the general decline in US herd sizes and the maximum tightness in the supply of fed cattle. Last year’s chuck roll prices peaked the second week of January, which may be the result of momentum buying, only to drop sharply into the summer lows.
The summer weakness is not surprising, given consumer desires to grill or eat lightly during the heat of the summer, but the early year declines to these lows is startling to many who assume this part of the year is ruled by roasts.
Wholesale bottom round prices also show weakness at this time of year, but the decline is not as sharp.
MIDDLE MEATS LESS WEAK
Conversely, middle meats, represented by the wholesale price of boneless loin strips, tend to hold steady to only slightly weaker at this time of year. The spring bounce begins this week as prices work up toward a June high.
Last year, prices were more volatile, pushing up to a spring top, followed by an early May low. The lower trend could not be maintained, and prices popped to the annual peak of $959.54 per cwt the first week of June.
CASH CATTLE TRADE QUIET
Cash cattle trading was quiet Monday.
Average fed cattle exchange auction prices Wednesday were $3.09 per cwt higher at $122.11, versus $119.02 a week earlier. Cash cattle trading was reported at mostly $124 to $125 per cwt on a live basis, compared with the previous week at $119 to $120.50. Dressed-basis trading was at $195 to $196, compared with $185 to $188.
The USDA’s choice cutout Monday was up $2.52 per cwt at $201.48, while select was up $1.60 at $197.08. The choice/select spread widened to $4.40 from $3.48 with 56 loads of fabricated product sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Friday was $127.06 per cwt, down $0.14. This compares with Monday’s Mar settlement of $123.85, up $2.15.