The beef hide and offal value continues to decline as edible by-product values dropped faster than hides, which comprise the bulk of the total value.
The hide and offal value often is called the drop credit. It is composed of the total value of all parts that “drop,” or are cut, off of the carcass, from which the various meat cuts are cut.
VALUES DECLINING
The USDA’s total drop credit this year has been much higher than the 2017-2021 average, and it remains above the average line on a graph of weekly prices. However, it has declined over the last four months and now is well below the 2022 line.
The USDA’s total drop credit last week was $11.79 per cwt on a live animal basis, down $2.51, or 17.6%, from $14.30 a year earlier but up $1.514, or 14.7%, from the average of $10.276. And, the total value is down from its latest peaks in September and October of $13.69 by $1.90, or 13.9%.
BUYING INTEREST DOWN
The decline in value for the various edible by-products could mean this year’s rise in the US dollar has eaten into the buying interest of various countries. Many of these products have a limited US customer base but have a stronger audience in other countries.
That makes their value much larger than if there were no export market for these items. US consumers, for instance, don’t eat many beef tongues, but Japanese consumers like them.
Tom Petry, Extension livestock marketing economist at North Dakota State University wrote in an article that the hide is the most valuable beef by-product, accounting for about half of the total drop credit. Other beef by-products include tallow, livers, hearts, tongues, oxtails, tripe and meat and bone meal.
Edible by-products often are called “variety meats.” Inedible products are used in a variety of pharmaceutical, cosmetic, household and industrial products, Petry said.
Hides often are sold to other countries like South Korea or China where they are tanned and made into products like shoes or car seats and sold back to the US. US pollution laws are more stringent on tanners than those of other countries, making for the export/import of these items.
In some respects, hide demand can fluctuate with the US economy, a market analyst once said. When times are good and leather clothing and car seats are within the budgets of more people, hide values increase. But when times are a little harder, and people have to stretch their budgets more, leather and hide values decline.
But in the current currency markets, the foreign interest in variety meats may be a bigger deal since no part of them comes back to the US, another analyst said.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $171.19 per cwt to $173.29, compared with last week’s range of $163.80 to $171.51 per cwt. FOB dressed steers, and heifers went for $267.36 per cwt to $271.38, compared with $266.16 to $271.15.
The USDA choice cutout Thursday was down $0.20 per cwt at $291.28 while select was off $1.08 at $259.24. The choice/select spread widened to $32.04 from $31.16 with 106 loads of fabricated product and 30 loads of trimmings and grinds sold into the spot market.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.28 to $1.38 a bushel over the Mar corn contract, which settled at $4.74 1/4 a bushel, down $0.02 1/4.
No delivery intentions were posted for Dec live cattle Thursday.
The CME Feeder Cattle Index for the seven days ended Wednesday was $217.71 per cwt, down $2.80. This compares with Thursday’s Jan contract settlement of $222.47, down $2.00.