As spring weather slowly warms the Northern Hemisphere, the USDA’s boxed beef cutout value of choice, 600- to 900-pound carcasses seems stalled, unable to muster a decent rally, a market analyst said.
By now, beef demand should be showing a marked rise in weekly prices for boxed beef at the wholesale level. Instead, a quick runup in January has given way to a market that seems to be propelled more by hope than substance, the analyst said.
THE SPRING RALLY THAT WASN’T
The 2016-2020 average weekly choice boxed beef cutout value shows a spring price rally that begins about the second week of April and peaks about the third week of May. Last year, a strong rally began early, about the third week of March, and never looked back, keeping the choice cutout above the five-year average for the rest of the year.
This year, there was a small price rise in March and early April that had many in the industry thinking “this is it, the spring rally is upon us.”
But no.
The April 1 rally fizzled, and the choice cutout crossed below the 2021 price line. It now appears to have the 2016-2020 average rally in its sights, possibly to cross below it in the next week or two.
Things were looking up last January, and continued to look better as economic stimulus checks came in the mail, the analyst said. But eventually, COVID restrictions eased, businesses began reopening, and the economy started to perk on its own, so stimulus checks stopped. Now, the economy is working through the aftermath of those payments and pandemic lockdowns.
Judging from the 2016-2020 average, the peak in the spring rally for choice boxed beef carcass prices should come the third week of May. Prices will drop after that because Memorial Day and Independence Day beef orders will all be in place except for a few last-minute fill-ins.
CHOICE/SELECT SPREAD NEAR NORMAL
It’s easy to throw stones at the choice/select price spread at times like this, thinking the spread must be narrowing, but data show the weekly average spread is near the 2016-2020 average so far this year.
This year’s weekly average choice/select spread price has crisscrossed the five-year average this year and currently has a general widening trend.
However, last week’s weekly average price dropped below last year and the previous five-year average as the average was moving up. This week’s average will have to hurry to catch up now.
Whether it can do that remains to be seen, but the analyst said the market doesn’t feel like it has the strength.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $142.65 to $142.97 per cwt, compared with last week’s range of $139.77 to $147.00. FOB dressed steers, and heifers went for $221.62 to $222.45 per cwt, versus $219.04 to $227.96.
The USDA choice cutout Monday was up $1.77 per cwt at $262.55, while select was up $0.26 at $248.23. The choice/select spread widened to $14.32 from $12.81 with 54 loads of fabricated product and 25 loads of trimmings and grinds sold into the spot market.
The USDA reported that basis bids for corn from feeders in the Southern Plains were at $1.55 to $1.65 a bushel over the Jul futures and for southwest Kansas were even the Jul, which settled at $8.03 1/2 a bushel, down $0.10.
The CME Feeder Cattle Index for the seven days ended Friday was $155.24 per cwt down $0.40. This compares with Monday’s May contract settlement of $161.42, up $5.07.