Beef Byproduct Values Pressure Packer Profits

Beef packers always are reluctant to pay up for cattle to slaughter, but their reticence may be growing as values for hides and offal continue to decline.

Hide and offal values traditionally are the make-or-break component of packing plant profitability.  Meat product values and prices are well known and followed closely by traders and market analysts.  Hide and offal values, by contrast tend to be less noticed but valuable products, especially now that export markets for many of these products make them much more valuable than in the distant past.

USDA Agricultural Marketing Service data compiled and graphed by the Livestock Marketing Information Center show the total value of byproducts from the cattle slaughter process to be declining since early July.

This year’s byproduct values have always been below the 2011-2015 average, but the gap is widening, and values fell below last year during the second week of August.

Looking at the data, pressure seems to be coming from the more valuable products, although no one item is particularly more at fault than any other – unless it would be the hides.




As the heaviest item in the list of byproducts that make up the USDA’s hide and offal report, hides take the brunt of the blame for the average being pressured.  They also carry the flag when the average hide and offal value climbs.

On a monthly basis, a butt-branded steer hide was valued at $50.47 in September, down $0.95, or 1.85%, from $51.42 in August, according to the LMIC.  This was the lowest monthly value this year, dropping from the 2017 high of $65.55 in March.

September’s value of $50.47 each for steer hides, also was $11.97, or 19.2%, below the $62.44 value of September 2016 and was $47.41, or 48.4%, off the recent September high of $97.88 in 2014.




By weight, inedible tallow comes in right after hides, but the value falls far short of hides.  Edible tallow listed by the LMIC came to $5.27 a steer in September, down $0.15, or 2.77%, from $5.42 in August, but up $0.59, or 12.6%, from $4.68 a year earlier.

Inedible tallow, was worth $15.56 per 1,000-pound steer in September, down $0.28, or 1.77%, from $15.84 in August but up $3.24, or 26.3%, from $12.32 in September 2016.




Tongues have continued to weaken this year, furthering a trend that began in October a year ago.  The latest price peak for tongues was at $19.50 each in September of 2016.  However, these items have weakened steadily into September 2017’s $12.35, a total decline of $7.15, or 37.7%.

The September 2016 price of $19.50 was the highest monthly price for tongues since at least 2007, so a decline would not be unusual.

The total byproduct value appears to be headed lower, too, tightening packer wallets.




Light sales were reported at the Livestock Exchange video auction last Wednesday at $109 per cwt on a live basis.  No sales were recorded the previous week.

Cash cattle traded last week at $110 to $112 per cwt on a live basis, moving from $110 on Wednesday to $112 on Friday.  On a dressed basis, cattle traded at $174 to $175.

The USDA’s choice cutout Tuesday was up $0.88 per cwt at $200.13, while select was up $1.64 at $192.69.  The choice/select spread narrowed to $7.44 from $8.20 with 88 loads of fabricated product sold into the spot market.

The CME Feeder Cattle index for the seven days ended Monday was $154.59 per cwt, down $0.10.  This compares with Tuesday’s Oct settlement of $155.12, up $1.50 and with the Nov settlement of $156.12, up $3.40.