Boxed beef cutout value is struggling to rise to a level that will provide packer buyers with a profitable margin while feeding margins hold steady.
Although packer margins improved two weeks ago, they still are calculated at a minus $75.31 per head. The Sterling Beef Profit Tracker said that margin was up from a minus $83.85 the previous week. However, a month earlier, packers were losing only $40 a head, and at this time last year, the loss was $30 a head.
Packer margins likely didn’t fare much better last week either as beef and fed cattle prices declined, leaving packers holding hefty losses.
The USDA’s choice carcass cutout value last week was listed at $250.35 per cwt, down $1.44 from the previous week and showing a stronger tendency to hold within a broad sideways range after setting a record high of $262.26 the second week of August and a nearby low of $238.19 the first week of October.
Anecdotal evidence says packers are getting significant pushback on pricing as holiday meats take up more space in weekly grocery advertisements. Hamburger is moving well, as are ribs and some roasts, but many other cuts are less in demand.
The choice/select spread also is showing some counter-seasonal weakness, just as it did last year at this time. The spread last week was just above the previous five-year average at $12.08, compared with the average of $11.63, and was headed lower.
Last year, the choice/select spread dipped below the average in late November before a pre-Christmas push higher and a sudden drop once the holiday demand for choice product was gone and consumers could fall back on select roasts through January.
FEEDLOT MARGINS STEADY
Feedlot margins two weeks ago were mostly steady, the Sterling Beef Profit Tracker said. During the first week of November, feedlot margins were calculated at $209.84 a head, rising $0.60 from the previous week.
Feedlot margins are significantly lower than a month earlier when they were calculated at about $227.00 a head but are 213% higher than the $72.51 a head seen last year.
Feed yard margins were helped this year as feed costs plummeted with a record corn harvest and fed cattle prices rose amid thinning numbers. Weekly feed costs were down at $300.84 a head, compared with $306.38 the previous week.
Further fed cattle pricing gains were expected next year although sources say much of what is possible to inflict on consumers may already be in the current pricing structure.
Fed cattle were about steady at mostly $167 per cwt on a live basis, compared with $164 a month earlier and $131 a year earlier.
NO CASH TRADING YET THIS WEEK
No cash cattle trading has been reported yet this week in the Plains. Packer bids are scarce with only a smattering of dressed-basis bids at $258 per cwt versus asking prices of $265. Live-basis asking prices are holding around $170 per cwt.
Boxed-beef prices Wednesday were higher, with the USDA’s choice cutout up $1.47 at $251.44, and the select cutout up $0.32 at $238.75. Both were up marginally from a week earlier when the choice cutout was $251.24 and the select cutout $238.12.
The choice/select spread Wednesday was $12.69, up from $11.54 on Tuesday.
Spot volume was good with 157 loads of fabricated product sold.
Sources say live cattle futures are struggling to provide cash with direction so cash prices may end up being about steady.
The CME Feeder Cattle Index for the seven days ended Tuesday was $240.86, down $0.35 from Monday, above the nearby Nov contract’s Wednesday settlement of $239.35.