Valuing a beef carcass involves working backward from individual beef items, said James Mitchell, Extension economist at the University of Arkansas in a publication to Extension agents from the Livestock Marketing Information Center called In The Cattle Markets.
First, prices for beef cuts are combined to create subprimal values, Mitchell said. Next, values are combined to calculate values for the seven beef primals: rib, chuck, round, loin, brisket, short plate and flank.
Finally, composite primal values are multiplied by their respective carcass yield percentages and summed to arrive at a beef cutout value for a specified quality grade, he said.
USDA-AMS reports boxed beef cutout values twice daily along with other boxed beef summary reports. For the week ending Friday, the choice cutout value was $297.79 per cwt, down 3.6%, from the previous week but still 36.5% above this time last year, Mitchell said.
The rib primal, the highest-valued beef primal, was down 4.5% last week, he said. The loin and chuck were down 3.8% and 4.3% compared with the previous week.
The round primal was 1.9% higher last week, while the brisket primal observed the largest weekly decline, down 11.5%, Mitchell said.
Like cattle prices, the boxed beef cutout value has a distinct seasonal pattern, he said. This is driven by price seasonality for individual beef cuts.
Based on monthly data from 2014-2018, choice boxed beef prices are highest in May, averaging 6.7% above the annual average price, Mitchell said. The seasonal high in May aligns with peak beef demand during grilling season.
Choice cutout prices decline through the summer, reaching a low in October when prices average 5.5% below the annual average, he said. Choice boxed beef prices recover but remain below the annual average, during November and December’s holiday season.
For the first half of 2021, the focus for beef markets was on replenishing restaurants as vaccine rollout began and COVD-19 restrictions relaxed, Mitchell said. At the same time, beef processors continued to struggle with labor and capacity issues.
Together, consumer beef demand and processing challenges led to strong choice cutout values through the first half of 2021, he said. More recently, choice boxed beef prices trended higher leading up to Labor Day, reaching a high of $347.02 per cwt before declining through September.
There are lingering questions about consumer beef demand moving into 2022, he said. Last year, we learned that consumers were willing to buy beef at higher prices.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $124.30 to $124.62 per cwt, compared with the previous week’s range of $123.68 to $125.06. FOB dressed steers and heifers went for $194.68 to $195.53 per cwt, versus $194.31 to $196.10.
The USDA choice cutout Monday was down $3.18 per cwt at $289.18, while select was up $0.32 at $265.16. The choice/select spread narrowed to $24.02 from $27.52 with 74 loads of fabricated product and 29 loads of trimmings and grinds sold into the spot market.
The USDA reported Monday that basis bids for corn from livestock feeding operations in the Southern Plains were unchanged at $1.20 to $1.35 a bushel over the Dec futures and for southwest Kansas were unchanged at $0.40 over Dec, which settled at $5.40 3/4 a bushel, down $0.00 3/4.
No contracts were tendered for delivery Monday against the Oct live cattle contract.
The CME Feeder Cattle Index for the seven days ended Friday was $152.53 per cwt down $1.19. This compares with Monday’s Oct contract settlement of $155.00 per cwt, up $2.25.