Beef Price Rally Continues

The Christmas rally in wholesale beef markets continued last week as prices headed into late December at their highest levels since early September, said Derrell Peel, Oklahoma State University Extension Livestock Marketing Specialist in the Cow/Calf Corner.

Through last week, the weekly choice boxed beef price rose $17.24 per cwt, or 9.58%, to $197.23 from the late October low of $179.99 and was $3.39, or 1.75% above a year ago’s $193.84.

That is quite impressive given that beef production continues stronger than expected in the fourth quarter, Peel said.

 

BEEF PRODUCTION UP, TOO

 

Beef production for the four weeks through mid-December was 2.002 billion pounds, 1.676 million, or 9.1%, above the same period last year.  For the year, choice boxed beef prices averaged 12.9% lower, while beef production was up 5.7% at 505.0 million pounds.

November’s retail choice beef price was $5.76 a pound, up slightly from October and down 7.2% from a year ago.  The all fresh retail beef price was $5.54 a pound, down from $5.63 in October and down 7.5% from last year.

 

STRONG RATIOS TO PORK, POULTRY

 

Despite larger total meat supplies and a particularly strong jump in beef production, retail beef prices have maintained strong ratios to pork and poultry but are slowly adjusting down, Peel said.  November’s all fresh beef-to-pork retail price ratio was 1.53, down from the peak of 1.65 in June 2015.  This ratio averaged 1.33 in the five years from 2009-2013 and has averaged 1.5 since Jan 2014.

November’s all fresh beef-to-broiler retail price ratio was 2.93, down from the 3.13 peak in May of 2015, he said.  The 2009-2013 average was 2.4 but has averaged 2.98 since January 2014.

There are indications that retail beef demand has shifted somewhat back to middle meats after several years of relatively stronger end meats, he said.  Mixed strength in steak demand generally was countered by weak processing beef markets and lower end meat values in 2016.  In the last four weeks, rib primal values climbed to nearly 3% over this time last year.

However, loins were nearly 12% lower the past month year over year with strips and short loin values down double digit percentages and tenderloins just about equal, he said.  The lower loin value is a continuation of an apparent downward trend in relative loin values in the past decade.

Chuck values are down just over 6% year over year in the past four weeks with rounds down 8%.

Domestic beef demand in 2017 will depend on macroeconomic factors like income growth and unemployment as well as the effect of larger total meat supplies.

Beef export and import flows not only have a quantity effect but also change the mix of beef products that make up domestic consumption and will affect overall demand in 2017, Peel said.

 

CASH CATTLE TRADE HIGHER

 

Average auction prices Wednesday were $2.71 per cwt higher at $115.39, versus $112.68 a week earlier.  Cash cattle then traded in Nebraska at $115 to $116.50 on a live basis followed by trades elsewhere up to $118 on Thursday.  Dressed-basis trades ranged from $188 to $190.  This compares with last week’s full range of $113.25 to $116 live and $180 dressed.

The USDA’s choice cutout Thursday was $1.63 per cwt higher at $203.47, while select was up $0.74 at $193.89.  The choice/select spread widened to $9.58 from $8.69 with 79 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Wednesday was $133.04 per cwt, up $0.68.  This compares with Thursday’s Jan settlement of $131.92, up $0.20.