Beef markets may be moving past the worst of the disruptions of recent weeks, said Oklahoma State University agricultural economist Derrell Peel in a letter to Extension agents called Cow/Calf Corner.
Beef markets were thrown into turmoil in March as food service markets were sharply curtailed and beef demand focused on retail grocery, Peel said. This caused supply bottlenecks and an initial wave of disruptions in product flows.
COVID-19 STRIKES
Beginning in early April, COVID-19 began to affect employees in many packing plants, closing some and reducing slaughter rates, Peel said. Beef production decreased from year-earlier levels for four straight weeks.
The lowest point occurred the last week of April when total cattle slaughter was down 34.8% year over year, he said. Beef production that week was down 33.8% from a year earlier.
Significant recovery has occurred since then with estimated slaughter the week ending May 30 down 10.9% year over year, Peel said. With cattle carcass weights increasing sharply because of delays in fed cattle marketings, estimated beef production last week was down just 7.6% from a year earlier.
BOXED BEEF PRICES
Choice boxed beef prices increased from late March until late May, he said. After averaging less than $210 per cwt early in the year, prices increased in late March, dropped briefly in early April, before increasing to a peak at $459.04 in mid-May. Choice boxed beef prices dropped to a weekly level of $374.04 per cwt at the end of May.
Individual beef products have been on a wide variety of dynamic paths through all the turmoil since March, Peel said. Prices for products dependent on food service demand, including many middle meats, dropped in March before general shortages pushed them higher in April and May.
Choice wholesale beef tenderloin dropped from an average price just under $970 per cwt early in 2020, to a weekly low of $533.33 in early April before increasing to a mid-May peak of $1,238.88 he said. Choice tenderloin prices decreased to $1,219.68 per cwt by the end of May.
END CUTS SEE MORE DEMAND
Many end cuts showed increased demand beginning in March continuing through April and pushed prices even higher by decreased supplies to mid-May, Peel said. For example, the price of chuck rolls increased weekly, beginning in mid-March from a pre-COVID-19 average near $266 per cwt to a peak in early May of $628.94 before dropping back to $466.03 by the end of May.
The last few weeks have revealed much about the nature of specialized beef supply chains and much about the variable demands for the wide variety of beef products, he said. It has also revealed how market prices adjust to wild swings in product demand and supply conditions.
Additional dynamics are expected as food service continues a slow recovery and macroeconomic conditions continue to affect beef demand, but beef product markets may be settling back into a much more stable situation and with typical product price relationships re-established.
CATTLE, BEEF RECAP
Fed cattle trading was reported this week at $109 to $118 per cwt on a live basis, down $2 to $3 from last week’s range. Dressed-basis trading was seen at $176 to $187 per cwt, down $2 to $3.
The USDA choice cutout Wednesday was down $22.83 per cwt at $295.90, while select was off $13.80 at $276.78. The choice/select spread narrowed to $19.12 from $28.15 with 102 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Tuesday was $128.65 per cwt, up $0.40. This compares with Wednesday’s Aug contract settlement of $134.22, up $0.80.