It looks like domestic and foreign beef buyers are becoming more price conscious, and the trend could continue into 2022, market analysts say.
But the data isn’t a straightforward corridor. The figures offer many doors into which the 2022 beef market might dive, and a look ahead could miss seeing an important doorknob in that hallway.
CHOICE BEEF STRONG, DECLINING
USDA data show that weekly average wholesale prices for choice beef are still higher than last year and the previous five-year average. Yet prices for this product have been declining since the second week of November.
The average negotiated weekly price for choice 600- to 900-pound carcasses last week was $262.04 per cwt, down from the most recent peak of $288.64, which came the first week of November.
The decline in weekly wholesale choice boxed beef prices is a seasonal move as grocers and restaurants tend to have their needs booked into late December. Their goal is to have just enough high-quality beef on their shelves to sell out by New Year’s Eve, so there usually is a late spot-market bump to cover some last-minute shopping.
It’s also important to remember, one analyst said, that this year’s choice beef prices have trended well above the 2015-2019 average in all but a couple of weeks in January and March. The USDA’s Agricultural Marketing Service listed the peak weekly choice beef price at $338.93 per cwt the second week of August, well above $209.91 in the same week a year earlier and the previous five-year average of $216.83.
A FLY IN THE OINTMENT?
However, all may not be well in the wholesale beef market, the analysts said.
Buyers are becoming more price conscious at a time when they should not be, the data showed. The difference between wholesale prices for choice and select beef, called the choice/select spread, continues to narrow.
As of last week, the choice/select spread narrowing was right on schedule and near the 2015-2019 average, but from the second week of September through mid-November, the spread narrowed counter-seasonally. This narrowing could have come because of extra buying interest in select product, through less interest in choice or both.
One market analyst pointed out that this was a period when Brazil was shut out of China’s markets by a case of atypical Bovine Spongiform Encephalopathy. During this time, the US sold more beef to price-conscious China than it might have were there no BSE.
But now that Brazil can ship to China again, will the US choice/select spread regain some of its strength. Maybe not with tax time and credit card bills coming.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $137.09 to $138.00 per cwt, compared with last week’s range of $140.00 to $142.17. FOB dressed steers and heifers went for $218.04 to $219.75 per cwt, versus $219.83 to $221.74.
The USDA choice cutout Tuesday was down $0.99 per cwt at $261.39, while select was down $0.75 at $249.92. The choice/select spread narrowed to $11.47 from $11.71 with 98 loads of fabricated product and 18 loads of trimmings and grinds sold into the spot market.
The USDA reported Tuesday that basis bids for corn from livestock feeding operations in the Southern Plains were unchanged at $1.35 to $1.45 a bushel over the Mar futures and for southwest Kansas were unchanged at $0.40 over Mar, which settled at $5.98 1/4 a bushel, up $0.07 1/4.
No delivery intentions were posted against the Dec live cattle contract Tuesday.
The CME Feeder Cattle Index for the seven days ended Monday was $160.34 per cwt down $0.36. This compares with Tuesday’s Jan contract settlement of $160.85 per cwt, up $1.62.