Amid the uncertainty of the fed cattle and wholesale beef markets in the wake of Tyson Foods’ fire at its Holcomb, KS, plant, is the possibility that cattle and product prices could make counter-seasonal moves.
In the end, the markets likely will even out, but in the short run, the uncertainties of how, when and where are likely to push markets where they wouldn’t want to go if the fire had not occurred.
CUTOUT COULD MOVE UP
One of the main victims of the fire will be the wholesale price of boxed beef. The Holcomb plant only kills and processes about 5% of US beef, but packing plants usually run so close to maximum capacity that any disruption could cause an uproar in the markets.
That happened this week as choice boxed beef prices shot up at least $20 per cwt, according to USDA data.
Average weekly price moves for choice boxed beef for 2013-2017 have the market making a seasonal top last week at $218.95 per cwt. By comparison, Thursday’s choice boxed beef cutout value was listed by the USDA at $236.12 per cwt, up $3.78 from Wednesday.
It should be noted that the weekly average choice boxed beef price last year did not hit its seasonal peak until the last week of August at $213.86.
After this seasonal top, weekly wholesale choice beef prices drop until the annual bottom is hit the first or second week of October.
The beef market makes this seasonal top in August as retailers pick up the last of their expected needs for their Labor Day features. Most of this product has already been ordered, and much of it is in place in local coolers, but there’s always some filling-in that needs to be done.
Once that buying is out of the way, consumer buying interest shifts over to roasts and away from middle meat (steak) items pretty quickly. Children are back in school, and there are credit cards to pay down from buying back-to-school needs.
STEER PRICES COULD DROP
Fed steer prices could decline sharply as a result of the fire. This week’s fed cattle prices in the Plains already were down $7 to $9 per cwt from last week.
Fed steer prices typically are weak this time of year anyway, so some might argue that this week’s price drop might have occurred anyway. The Holcomb fire was just the catalyst.
But the Livestock Marketing Information Center listed last week’s average price for fed steers in the Plains at $112.36 per cwt. A drop of $8 would take it to $104.36, well below last year’s $110.98.
Prices could stabilize there and make this week’s price drop a knee-jerk reaction to the fire. After all, Tyson did say that officials planned to make up the slaughter at its other beef plants with extra shifts.
If they do, and the market can count on it, cattle prices may stabilize.
CATTLE, BEEF RECAP
Cash cattle traded this week at $106 to $107 per cwt on a live basis, down $7 to $9 from last week, and at $170 dressed, down $11 to $13.
The USDA choice cutout Thursday was up $3.78 per cwt at $236.12, while select was up $4.75 at $210.67. The choice/select spread narrowed to $25.45 from $26.42 with 53 loads of fabricated product sold into the spot market.
No cattle were tendered for delivery against the Aug contract Thursday.
The CME Feeder Cattle index for the seven days ended Wednesday was $139.15 per cwt, down $0.74 from the previous day. This compares with Thursday’s Aug contract settlement of $135.77, up $1.30.