Traders are watching beef prices for signs of a seasonal turn higher, and they may have gotten their wish with last week’s bounce in the USDA’s weekly cutout value.
The USDA reported its value for choice 600- to 900-pound beef carcasses last week at $234.84 per cwt, up $2.12, or 0.91%, from $232.73 a week earlier. If this is the seasonal turn, the actual bottom was set two weeks ago at $232.67, but the weekly change of $0.06 was too small to call last week’s price a turn higher from a seasonal low.
And if the low occurred two weeks ago, it was earlier than the previous five-year average by two to three weeks. Last week’s price gains would be more in line with the timing of previous summer turns.
Beef prices tend to turn higher in late July or early August as the USDA steps up meat purchases for school lunch programs and grocers begin to fill in the last of their purchases for the Labor Day holiday weekend in early September.
However, the late summer price bounce is fleeting. Once the buying surge is complete, beef prices tend to lag into early October when wholesale buying interest picks up in preparation for the end-of-year holidays. While the Thanksgiving Day holiday is associated heavily with turkey and ham, there is a measurable increase in demand for choice and prime rib roasts.
Consumers typically see more pork advertising from their local grocery store in October. Wholesale prices usually are very attractive, shoppers are ready for something a little different than beef or chicken, and a month of pork emphasis tends to set the stage for holiday advertising in November and December.
Rib consumption also is noted for the Christmas holiday, and some have linked briskets with Hanukah celebrations. In between is a steady consumer buying interest for non-holiday, everyday items like chuck and round roasts along with ground beef.
INDIVIDUAL CUT PRICES TREND HIGHER
As the generalized choice beef cutout value turns higher, it makes sense that prices for individual cuts would move higher as well.
Such has been the case for all major carcass cuts except 90% lean trimmings, which goes into any lean, processed product like some hamburgers. These prices began to turn south in early July and now are below year-earlier levels, although they remain well above the previous five-year average. Cheaper imported lean beef was said to be undercutting the value of these products.
Prices for 50% lean trimmings turned higher two weeks ago after dropping below the previous five-year average in late June. These products are ground and usually mixed with leaner ground beef to obtain the desired fat content of the finished product.
Wholesale prices for boneless loin strips also turned higher two weeks ago and appear to be on their way toward setting the seasonal peak, which is secondary to the peak which happens the first week of June.
Boneless ribeye prices also are turning higher seasonally.
Wholesale beef bottom round prices also appear to be following a general seasonal trend higher. However, the actual bottom was earlier than normal and tended to follow last year’s directional leading. Prices currently are below last year, but deviations from last year generally have not been wide.
CASH CATTLE MARKET QUIET
Cash cattle markets Monday were quiet, with no bids or offers reported.
The markets last week traded at mostly $150 per cwt with some up $2 to $3 to $152 after trading $2 higher last week. On a dressed basis, cattle traded at $236 to $238, up $4 from the previous week.
The USDA’s beef cutout values Monday were higher again, following last week’s lead. The USDA reported its choice cutout at $238.52 per cwt, up $2.18. Select was reported at $231.92, up $1.78 for the day. Volume Monday was light with 85 loads of fabricated cuts being sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Friday was $216.66, down $0.47, compared with Monday’s Aug settlement of $214.25, up $0.12.