50% Lean Beef Prices Bounce; Is It A Bottom?

After plunging to their second-lowest point this year, weekly average wholesale prices for 50% lean beef bounced last week, leading some to wonder if the product hasn’t found at least a temporary bottom.

The USDA-Agricultural Marketing Service price compiled and recorded by the Livestock Marketing Information Center in Denver two weeks ago was $61.68 per cwt, down $110.61, or 64.2%, from the year’s top of $172.29 struck the third week of August.

 

A RETURN TO NORMAL

 

However, the two-month move by the 50% lean brought the product’s wholesale price back to the reality of the 2018-2022 average.  Last week’s value of $65.03 per cwt was down $15.08, or 18.8%, from $80.11 a year earlier but up $0.78, or 1.21%, from the previous five-year average of $64.25.

And, the price of the product last year was declining from spring and early summer highs, so if this week’s average price for 50% lean beef rises again, it could bisect last year’s price of $69.64.

Last year, the weekly average price for 50% lean beef continued to decline into the end of the year, punctuated by two weekly gains the last week of November and the last week of December.  The 2018-2022 average has the price rebounding slightly to the second week of November where it drifts lower and is interrupted by a bump the last week of December.

 

NOT A SURPRISING MOVE

 

The decline in 50% lean beef prices shouldn’t be much of a surprise.  Weekly USDA choice beef production as a percent of graded beef hit what so far is this year’s bottom the third week of June, rising counter-seasonally to a near-term peak of $73.36 the third week of August.

The product’s production has since declined in a very volatile line but remained at a higher level than either the same week last year or the previous five-year average.

And, since choice beef carcasses produce much of the 50% lean beef, the volume of 50% beef produced, as a percentage of the whole rose through the summer and remained above the percentage of leaner 90% beef available to the market.

Conversely, weekly cow slaughter, the origin of most of the 90% lean beef produced in this country has been down from last year and the corresponding week in the 2018-2022 average all year.  This keeps the very lean beef in tight supplies, increasing the price and the market’s reliance on imported beef, which is mostly lean beef from cows or grass-fed cattle.

 

CATTLE, BEEF RECAP

 

The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $189.82 per cwt to $194.48, compared with last week’s range of $187.95 to $194.48 per cwt.  FOB dressed steers, and heifers went for $294.98 per cwt to $299.39, compared with $293.66 to $298.77.

The USDA choice cutout Tuesday was down $2.89 per cwt at $320.61 while select was down $2.22 at $289.96.  The choice/select spread narrowed to $30.65 from $31.32 with 109 loads of fabricated product and 41 loads of trimmings and grinds sold into the spot market.

The USDA-listed weighted average wholesale price for fresh 90% lean beef was $351.17 per cwt, and 50% beef was $68.48.

The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.26 to $1.45 a bushel over the Dec corn contract and unchanged in Kansas at $0.25 over Dec, which settled at $4.13 3/4 a bushel, up $0.03.

No cattle contracts were tendered for delivery Tuesday against the Oct contract.

The CME Feeder Cattle Index for the seven days ended Monday was $249.49 per cwt, up $0.12.  This compares with Tuesday’s Oct contract settlement of $250.02, down $0.05 and Nov’s $246.60, down $2.60.