2-26-21 – In 2020, the US exported $7.6 billion in beef and variety meat products (down 6% from 2019); variety meat exports accounted for 11.8% of this, down from 12.4% in 2019, said Brenda Boetel, agricultural economist at the University of Wisconsin-River Falls, in a Livestock Marketing Information Center letter to Extension agents called In The Cattle Market.
When the value for hides and offal products is added, the total offal value plus hides accounted for 20.7% of the export value in 2020, down from 22% in 2019. Variety meats account for a significant percentage of the export value, so what value do these by-products add to the finished steer?
VALUE PER STEER
On Feb. 23, the USDA’s Agricultural Marketing Service estimated the hide and offal value from a typical slaughter steer at $9.71 per live cwt and includes values for cattle hides, variety meats and tallow. This equates to $135.94 for a 1,400-pound steer.
The value has been increasing recently and is at a level last seen in May 2018.
Items that add the greatest value to the byproduct value reported by AMS are the hide, tallow, tongue, tripe, oxtail and cheek meat. Japan and Mexico are the leading importers of US variety meats, importing $369 million and $228 million worth, respectively, in 2020.
Japan is the leading importer of beef tongue, while Mexico leads in beef tripe. As their imports of variety meats change, so does the value contribution of tongue and tripe in the overall byproduct value calculation, which ultimately will affect the finished steer price.
Beef and beef by-products are produced in nearly fixed proportions. However, when packers experienced line disruption in 2020, many plants changed fabrication methods to keep more whole muscles/primals intact and keep less offal to maximize line speed.
CHANGES
The decrease in beef and offal provided fewer opportunities for exports, and by-product values decreased to $6.79 in May 2020. When these edible offal products are not exported, they often will go into rendering or into pet food and ultimately decrease the overall value of the finished steer.
With the continued recovery from COVID disruptions, by-product production generally has returned to pre-COVID levels, and, given the relatively fixed pounds of by-products per steer, the by-product value contributions have been increasing primarily from changes in demand.
Beef exports are expected to be up almost 6% in 2021. As exports of beef and variety meats rise, additional support to the finished steer price is provided.
CATTLE, BEEF RECAP
Limited fed cattle trading was reported in the Plains this week at $114 to $115.50 per cwt on a live basis, down $0.50 to up $1 from last week. Dressed-basis trading was seen at $181, to $182, steady to up $1.
The USDA choice cutout Thursday was down $0.36 per cwt at $240.39, while select was down $1.00 at $228.79. The choice/select spread widened to $11.60 from $11.51 with 73 loads of fabricated product and 18 loads of trimmings and grinds sold into the spot market.
The USDA reported Thursday that basis bids for corn from livestock feeding operations in the Southern Plains were unchanged at $1.00 to $1.25 a bushel over the Mar CBOT futures contract, which settled at $5.54 3/4 a bushel, down $0.04 1/2.
No new contracts were tendered for delivery against the Feb futures contract Thursday.
The CME Feeder Cattle Index for the seven days ended Wednesday was $139.48 per cwt, down $0.63. This compares with Thursday’s Mar contract settlement of $140.42 per cwt, up $0.05.