As the USDA’s beef cutout values sink, showing a seasonal top two weeks ago, a look at specific cuts reveals much of the decline is because of small losses in chucks and rounds.
These two primal cuts alone make up 52.0% of the total carcass so small dips in these primals can have a larger effect on the total cutout, meat sources say.
A look at USDA figures for the chuck show that it peaked at $220.50 per cwt during the week of July 28, and last week had declined to $212.80 for a 3.49% slide. On average, the chuck makes up 29.59% of the carcass.
The round has shown a similar falling away, dipping to $242.00 per cwt last week from its record high of $259.50 the week of Aug. 4, for a 6.74% decline.
Since the chuck and round at this time of year find their way into grinders for sale as hamburger, it might be expected that ground beef prices are slipping as well.
Coarse ground beef with 81% lean content also peaked seasonally in late July. This seasonal peak is early. In previous years, the peak has come in late August as consumers wind up their Labor Day purchases.
However, this year, the summer rally began early and has been sharper than in most other years. The rally in 81% ground beef began in mid-June, a time when prices generally drift to the summer low in late July or early August.
Market analysts now say they expect the slide to last until prices hit seasonal support in late September or early October, although short supplies likely will keep prices elevated.
Chucks and rounds also are expected to stay above previous years. Both remain near their record highs, even if they have come off a little the last two weeks. Chucks are 32.8% higher than the $160.30 price last year, and rounds are 46.1% higher than last year’s $165.60.
OTHER CUTS ALSO FADING
Besides the chucks and rounds, loin prices also are fading. This primal makes up 21.25% of the carcass and has been moving sideways since falling from its most recent high the second week of July, according to USDA data.
Loin prices remain above a year ago and the five-year average, but they appear to be settling in to the seasonal slide that lasts into December. They just began the tilt earlier than normal.
What may help support beef prices in general, and choice beef in particular, is a seasonal decline in the percentage of beef that grades choice, market sources say. The percentage of carcasses that grade choice has begun its seasonal decline into September or October, accentuating the choice/select price spread.
The percentage of cattle grading choice is up since the industry dropped the use of the feed additive Zilmax, so the percentage of choice versus select is liable to remain higher than a year ago and the average, although it is expected to follow the same trend.
NO FED CATTLE TRADING
No fed cattle trading was reported in the Plains yet this week. Asking prices are expected near $157 per cwt on a live basis, up $2 from last week’s $155 trades. Bids were expected to be at least $2 below last week but could be influenced by lower futures prices, if Tuesday’s declines continue.
The CME Feeder Cattle Index for the seven days ended Monday was $220.11 per cwt, down $0.64. This remains above the Aug futures contract settlement price of $217.15 on Tuesday and likely helped to keep Aug from participating fully in Tuesday’s steep declines in tandem with live cattle.