Wholesale values for hide and offals, the by-products of the beef industry, the value of which often is called the drop credit, has been depressed all year and looks to decline even more.
That’s important because the drop credit traditionally is where the packing plant makes its profit margin.
What isn’t explained in USDA/Agricultural Marketing Service numbers is the cash flow generated by any portion of the slaughtered animal. The value per cwt may be high, but if there aren’t very many pounds, there is little income.
In the current market, just the opposite may be true. The number of cattle slaughtered is up, generating more pounds of by products into a declining market. But the increased availability also may be a major reason for the price decline.
HIDE VALUES DOWN
The lion’s share of the cattle drop credit is hides, which are down in value. The Livestock Marketing Information Center collects AMS data and compiles it.
That data show April’s average wholesale price for butt-branded steer hides (an industry benchmark) at $52.29 each, down $2.50, or 4.56%, from March’s $54.79 and down $12.32, or 19.1%, from $64.61 a year earlier. The average value of the 2012-2016 period is 79.95, $27.66, or 34.6%, above April.
LIVERS STEADY TO WEAK
Livers are another major item for beef packers. They are popular export items, even if US consumers generally eschew them.
The latest date put their April value at $1.98 a pound, unchanged from March and the same as a year earlier. However, the price is down $2.27, or 53.4%, from the 2012-2016 average of $4.25.
TONGUES DOWN
Tongues also are popular export items, especially to Japan. April’s listed price was $9.75 a pound, unchanged from March but down $3.25, or 35.0%, from last year’s $13.00 and down $0.94, or 8.79%, from the previous five-year average of $10.69.
HEARTS UP SLIGHTLY
Beef hearts are a by-product that is showing slight strength.
The April wholesale value was reported at $2.38 a pound, unchanged from March and up $0.10 a pound, or 4.39%, from $2.28 a year ago. April’s price also was up from the 2012-2016 average of $2.24, a gain of $0.14, or 6.25%.
MEAT SCRAPS ALSO SHOW FIRMNESS
AMS data show April’s value for meat scraps at $5.06 a pound, up $0.04, or 0.80%, from $5.02 in March and up $0.60, or 13.5%, from April 2017’s $4.46. However, April’s value was down $1.84, or 26.7%, from the previous five-year average of $6.90.
EDIBLE TALLOW VALUES OFF
The April value of edible tallow was $4.54 a pound, down $0.11, or 2.37%, from March’s $4.65 and off $0.49, or 9.74%, from the year-earlier value of $5.03. It also was below the 2012-2016 value of $6.20.
CATTLE, BEEF RECAP
No fed cattle sold Wednesday on the Livestock Exchange Video Auction, versus sales last week at $110 per cwt.
Cash cattle traded last week at $110 to $111.50 per cwt on a live basis, steady to up $1.50 from the previous week. Dressed-basis trading was seen at $177 to $178, steady to up $1.
The USDA choice cutout Thursday was down $0.56 per cwt at $226.41, while select was off $0.24 at $203.41. The choice/select spread narrowed to $23.00 from $23.32 with 71 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Wednesday, was $139.65 per cwt, up $0.44. This compares with Thursday’s Aug settlement of $146.07, down $0.67.