Beef by-product values have been well below the 2013-2018 average for the last 18-months, and are preventing any moves toward the five-year average.
Beef by-product values, especially hide values, often are considered a bit of a bellwether of global economic conditions, said Oklahoma State University Extension Livestock Marketing Specialist Derrell Peel, in a letter to producers called Cow/Calf Corner. As such, by-product values bear watching in coming months.
LOW BY-PRODUCTS HURT CATTLE VALUE
Current US beef by-product values are reducing fed cattle values by more than $110 a head, compared with peak by-product values just five years ago, Peel said.
On average, beef by-product values represent about 10% of fed cattle prices, he said. Weekly values dropped to about $9.00 per cwt from about $10.70 last year.
By-products represented 8.2% of fed cattle prices last year at an average value of $9.60 per cwt on a live-weight basis, Peel said. In contrast, last week’s by-products value was $8.88 per cwt, and for the first 29 weeks of 2019, they averaged $8.78 per cwt, or 7.2%, of fed cattle prices.
WEAK HIDES PULLING TOTAL DOWN
Hides make up the single largest component of by-product values, and a weak global hide market has sharply eroded total by-product values, he said. In the 2013-2017 period, butt-branded steer hides averaged $74.36 each and represented 52.3% of the total by-product value. In 2018, hides represented 45.6% of by-product value with an average value of $47.93.
In the first half of this year, hides averaged $34.46 each and accounted for 36.6% of total by-product values, Peel said. The June monthly average hide value was $27.60 as the global hide market to weakened.
Hide supplies are larger because of increased cattle numbers and slaughter, especially in Brazil and the US, he said.
China is the major global buyer of hides where demand is hampered by tariffs and trade disruptions and by stronger environmental regulations affecting small tanneries, Peel said.
Values are so low that more are being rendered, are not worth marketing into other markets or exported at a loss because the cost of environmental regulations to dispose of them is a greater loss, Peel said. Other factors are exchange rates and less demand for leather in luxury cars and footwear, which are using more synthetic materials.
THOSE OTHER BY-PRODUCTS
Aside from hides, the most important beef by-products in terms of value include tongue, liver, tripe, heart, cheek meat, edible tallow and meat scraps along with inedible tallow, he said. So far in 2019, these items have had an average value of $4.52 per cwt of fed cattle, up from $4.30 in 2018.
Additionally, a host of minor by-products add another $1.43 per cwt to by-product values, Peel said. These include products that are used for pet food or rendering, including trachea, lungs and inedible livers and hearts.
CATTLE, BEEF RECAP
Cash cattle traded in Kansas Wednesday at $111 per cwt on a live basis, down $1 from last week, and this week at $114 to $116 in Nebraska, steady to down $1. Dressed-basis trading occurred in eastern Nebraska at $183 to $185 per cwt, steady to up $2 from last week.
The USDA choice cutout Thursday was up $0.70 per cwt at $214.24, while select was off $0.35 at $189.34. The choice/select spread widened to $24.90 from $23.85 with 86 loads of fabricated product sold into the spot market.
There were 38 heifer and 11 steer delivery notices posted Thursday.
The CME Feeder Cattle index for the seven days ended Wednesday was $142.23 per cwt, up $0.08 from the previous day. This compares with Thursday’s Aug contract settlement of $141.22, down $0.30.