Recent cattle producer conclaves have railed against the beef packer for making huge profits while leaving the cattle feeder in the dust, but weekly USDA boxed beef data shoes that beef values are coming back toward normal.
The USDA’s weekly average negotiated price for choice 600- to 900-pound carcasses jumped in August, possibly a response to fears of tightening supplies after a fire at Tyson’s Finney County, KS, beef plant near Holcomb, KS, on Aug. 8. But since the peak the last week of August, the choice carcass price has dropped almost as dramatically.
The average price last week remained above that of the same week last year and the 2013-2017 average but still was pointed sharply lower, pointing toward a merge within the next week or two.
PRICE SPIKE STANDS OUT
The August price spike stands out as unusual on a line graph of the average weekly choice beef carcass price plotted by the Livestock Marketing Information Center. Prior to that, the average weekly wholesale price of the choice carcasses ran close to last year and the previous five-year average.
After the Tyson fire, cattle feeders lamented a decline in fed cattle prices, but this weakening nowhere near matched the graphed spike in beef prices.
Market analysts reported anecdotal evidence of fears among beef buyers that they would not be able to obtain the beef they needed for already scheduled beef features. Much of this beef is booked in advance for scheduled delivery, but after the fire, enough uncertainty wound its way through the markets that the prices for last-minute bookings (which is what the USDA captures in its negotiated boxed beef price report) rose sharply.
However, as it became apparent that Tyson, along with some other packers were willing to put in a Saturday shift at more of their plants and keep up the normal rate of slaughter and beef production, buyers backed off, and prices began to tumble toward normal.
WHAT TO EXPECT NOW
Normally, the wholesale price for choice boxed beef has a seasonal bump in August, which interrupts a long decline to an annual weekly low the first week of October from the annual high in the middle of May.
After that, wholesale prices rally again to a seasonal peak in mid-November as buyers book their expected December needs.
The graph of weekly wholesale beef prices shows the August spike was so unusual that there is no reason to think prices won’t decline further and rejoin the normal flow of things by mid- to late October, a market analyst said.
Tyson has said that it is planning for the Finney County plant to be back up and running sometime around the end of the year. If the market sees that this is a reasonable expectation, beef prices could drop below last year and the five-year average until they see that packers will halt the Saturday kills.
CATTLE, BEEF RECAP
Cash cattle trade took place in the Plains this week at $106 per cwt on a live basis, up $3 to down $1 from last week. No dressed-basis trade was reported but took place last week at mostly $165 per cwt, steady to up $5.
The USDA choice cutout Thursday was down $0.91 per cwt at $212.06, while select was up $1.31 at $187.21. The choice/select spread narrowed to $24.85 from $27.07 with 108 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Wednesday was $142.92 per cwt, down $0.17 from the previous day. This compares with Thursday’s Oct contract settlement of $142.35, up $0.27.