By-products are a significant value component of the cattle and beef industry, but capturing the value of by-products is challenging, especially for small packers, said Derrell Peel, Oklahoma State University Extension livestock marketing specialist, in a letter called Cow-Calf Corner.
BY-PRODUCT PRODUCTION “ENORMOUS”
The beef industry produces an enormous set of edible and inedible products, Peel said. Over the last 15 years, steer by-product values have averaged $11.77 per cwt on a live weight basis. This is roughly $165 a head, or about 9.5% of the total value of a fed steer.
In the 2009-2023 period, steer by-product values varied from a monthly low of $5.90 per cwt to a high of $16.59 per cwt, Peel said. As a percent of total fed steer value, by-product value varied from a low of 6.2% to a high of 13.1%.
EDIBLE, INEDIBLE PRODUCTS
The set of products included in total by-product values includes edible offals, inedible offals, meat. bone and blood meal, edible and inedible tallow, hides and pharmaceutical products, he said.
Edible beef by-products include a variety of muscle and organ meats like livers, tongues, tripe, heart, oxtail, sweetbreads, edible tallow, and cheek and head meat, much of which is exported or used in processed products, Peel said. Edible tallow is used for cooking and processed foods, and bones are the source of gelatin used in many products (think gummy bears). Some tallow also is used for cosmetics and soaps.
Inedible organs are used primarily for pet food, including lungs, trachea, inedible livers and spleens, he said. Inedible tallow has industrial uses and, more recently, biodiesel production.
Hides are a significant part of the total by-product value of cattle, Peel said. Most hides are exported.
Some products, like gallstones and fetal blood serum, are harvested infrequently but have very high values, he said.
SEPARATE MARKETS
Each by-product item operates in a separate market with variable values and market conditions, Peel said.
For example, the high by-product values in 2014-2015 were driven largely by very strong hide values, he said. The more recent high prices in 2021-2022 were the result of very strong demand for tallow used for biodiesel production.
The steer by-product value for March 1, was $11.64 per cwt and shows tallow is the largest contributor to by-product value at 20.3% of the total; hides were second at 18.4%; tongues at 15.2%, and tripe at 11.9%, Peel said. These total roughly two-thirds of the total by-product value.
With tight supplies driving beef and cattle prices higher, by-products currently represent only about 6.4% of the total cattle value, versus the long-term average of about 9.5%.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $186.88 per cwt to $187.12, compared with last week’s range of $185.00 to $191.26 per cwt. FOB dressed steers, and heifers went for $294.46 per cwt to $294.74, compared with $287.48 to $294.53.
The USDA choice cutout Monday was up $1.43 per cwt at $313.33 while select was up $0.65 at $303.05. The choice/select spread widened to $10.28 from $9.50 with 69 loads of fabricated product and 59 loads of trimmings and grinds sold into the spot market.
The daily weighted average USDA listed wholesale price for fresh 90% lean beef was $330.04 per cwt, and 50% beef was $103.77.
The USDA said basis bids for corn from feeders in the Southern Plains were down $0.05 to $0.10 at $1.50 to $1.65 a bushel over the May corn contract, which settled at $4.36 a bushel, down $0.00 3/4.
The CME Feeder Cattle Index for the seven days ended Friday was $250.86 per cwt, up $1.86. This compares with Monday’s Mar contract settlement of $251.20, up $1.92.