While the wholesale beef market seems lackluster at present, unable to muster a seasonal rally, by historical standards it’s really in pretty good shape.
The problem for commodity markets is that packers have not, or have not been able to, ramp up slaughter rates and raise the price of slaughter-ready cattle. As a result, the money for a historically strong beef market stops at the packer.
The situation is nothing new to the cattle and beef markets, but may improve the lot of cattle feeders over the next year or so as the US herd declines, a market analyst said. Lower feedlot numbers often result in higher prices for those that are fed out.
The largest visible caveat is that consumer buying interest could drop off if inflation fears among some economists come to fruition, the analyst said. In this case, the smaller slaughter rates resulting from a smaller herd will have less of a bullish effect on prices.
Many also will point out that the negotiated beef market essentially has been replaced by contractual negotiations that are set up months in advance. However, contract prices are unknown since they are private arrangements and unavailable to public scrutiny, leaving the negotiated spot market as the best available alternative for determining price direction, the analyst said.
BOXED BEEF PRICES UP
Taken as a whole, data from the USDA’s Agricultural Marketing Service and compiled by the Livestock Marketing Information Center in Denver showed the weekly average reported negotiated price for choice 600-900-pound carcasses was $299.64 per cwt, up $15.23, or 5.35%, from $284.41 a week earlier. But what is important is that last week’s price was up $92.49, or 44.6%, from $207.15 per cwt in the same week in 2020 and up $87.67, or 41.4%, from the 2015-2019 average of $211.97.
There is little indication the trend of the boxed-beef cutout being above last year and the previous five-year average will change much for the rest of the year, although there could be a seasonal drop-off in the last half of December, the analyst said.
RIBS LEAD THE WAY
As usual for this time of year, rib primals are leading the way in the whole carcass value. What is unusual this year is that weekly primal rib prices have been higher than last year and the 2015-2019 average in all but one week, the second week of April.
AMS data show last week’s choice rib primal price at $496.55 per cwt, up from $490.20 a week earlier and up from the five-year average of $376.22.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $129.52 to $130.40 per cwt, compared with last week’s range of $125.93 to $127.88. FOB dressed steers and heifers went for $201.07 to $202.53 per cwt, versus $195.39 to $198.32.
The USDA choice cutout Monday was down $0.89 per cwt at $288.65, while select was up $1.08 at $268.60. The choice/select spread narrowed to $20.05 from $22.02 with 75 loads of fabricated product and 28 loads of trimmings and grinds sold into the spot market.
The USDA reported Monday that basis bids for corn from livestock feeding operations in the Southern Plains were unchanged at $1.30 to $1.40 a bushel over the Dec futures and for southwest Kansas were unchanged at $0.40 over Dec, which settled at $5.51 1/2 a bushel, down $0.01 1/2.
The CME Feeder Cattle Index for the seven days ended Friday was $154.62 per cwt down $0.65. This compares with Monday’s Nov contract settlement of $158.57 per cwt, down $0.30.