Beef Prices Continue 2015 Drop, Pressure Cattle Outlook

The outlook for fed cattle prices is not good.  Wholesale beef prices continue working lower and dipping below multi-year averages as they follow last year’s trend but at a lower level.

The USDA’s Agricultural Marketing Service’s price for choice boxed beef last week was $195.67 per cwt, below the 2010-2014 average of $196.21 by $0.54, or 0.28%.  It also was below $241.06 in the same week a year ago by $45.39, or 18.8%.

For the past month, this year’s choice boxed beef value seemed to move sharply lower when compared with last year.  But this was because prices last August rose sharply at the beginning of the month only to fall off again through September.

The choice cutout rose to $245.78 the third week of August last year only to drop to $203.67 the first week of October, a decline of $42.11, or 17.1%.

Continuing the seasonal trend toward lower beef prices in September would bring weekly quotes below the five-year average for the rest of the year.  And this outlook even takes into account a seasonal spike in rib prices for the holidays.

 

CHOICE/SELECT SPREAD BACK DOWN TO EARTH

 

Now that the choice/select spread has come back down to earth from its May-June spike, the seasonal demand for holiday ribs can only be expected to widen the spread again during the fall.

However, when comparing the graph of the choice/select spread to the choice boxed beef cutout value, it seems obvious that the fall widening of the spread is due more to a pulling away from select beef in order to concentrate on the choice, of which there always seems to be an adequate supply.

Trying to guess just when the fall spread widening will start is problematic.  The 2010-2014 average would suggest it should have begun three weeks ago.  But last year, it didn’t start until the first week of October.

But the average seasonal fall widening of the spread encompasses a gain of about $9.96 per cwt, or $194.4% going to a peak of $15.11 from a low of $5.15.

If the fall spread-widening were to begin with last week’s low, that would take the spread to $17.43, which compares with last year’s December peak at $13.93 and the five-year average high of $15.11.

 

CASH CATTLE MARKETS QUIET

 

Cash cattle markets Tuesday were quiet after trading last week at mostly $110 per cwt on a live basis and $175 dressed.

The USDA’s choice cutout Monday was $0.81 per cwt lower at $190.28, while select was off $0.54 at $186.53.  The choice/select spread narrowed to $3.75 from $4.02 with 85 loads of fabricated product sold into the spot market.

The USDA said select and choice ribs, chucks, rounds and loins were steady to weak, while trimmings were moderately higher in light-to-moderate demand and light offerings.

The CME Feeder Cattle Index for the seven days ended Monday was $138.77 per cwt, down $1.25.  This compares with the Sep settlement Tuesday of $130.50, down $4.37.