Fed cattle prices are strengthening, but wholesale beef price increases seem to be lagging, setting up a squeeze on beef packers and hinting at some consumer spending changes.
David Anderson, Extension economist at Texas A&M University, writing in the Livestock Marketing Information Center’s In The Cattle Markets, said while fed cattle prices jumped again, hitting $170 per cwt in some markets during the last week of March, wholesale beef prices have not increased along with cattle prices.
The choice beef cutout averaged $280.51 per cwt last week, up about $14 per cwt compared to the same time last year, Anderson said. The cutout has declined about $8 per cwt through March into early April.
BEEF CUTS MIXED
Wholesale prices for a few cuts reveal some interesting ups and downs, he said. Ribeyes, strip loins and full tenderloin prices declined over March, while boneless ribeyes averaged $9.83 per pound the last week of March after hitting $10.69 earlier in the month.
Ribeyes often hit a seasonal peak in recent years around the Memorial Day holiday as a grilling feature, Anderson said. While a little early for this peak, tight supplies in the first quarter of the year probably contributed to some higher prices.
Strip loins fell back to $7.57 a pound, about equal to last year, after reaching $8.77 a few weeks ago, he said. The peak in strips also is a little earlier than usual and likely linked to tighter supplies as fewer fed cattle go to market.
FED CATTLE SUPPLIES TIGHT
Tighter supplies of fed cattle and the sharp decline in beef cows going to slaughter have contributed to rapidly escalating wholesale boneless beef prices, Anderson said. Ninety percent lean boneless beef has increased steadily this year from $2.45 per pound in January to $2.74 a pound the last week of March. This is only about $0.09 a pound lower than last year at this time.
Large beef cow slaughter rates kept lean boneless beef prices declining through most of 2022, he said. This likely will be reversed as beef cow slaughter sharply declined so far this year.
Weekly slaughter in mid-March was 61,000 head compared with 75,000 head the same week last year, Anderson said. This also was the smallest non-holiday weekly beef cow slaughter since April 2021.
Fifty percent lean boneless beef prices hit $1.44 per pound the last week of March as fed cattle beef production tightened, he said.
Falling wholesale steak cut prices and rising wholesale boneless beef might suggest some changes in consumer purchases to come, Anderson said. USDA weekly beef featuring data indicated 69% of surveyed grocery stores running some kind of feature the last week of March compared with about 62% the same week last year.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week was unavailable, compared with last week’s range of $164.63 to $171.57 per cwt. FOB dressed steers, and heifers went for $256.76 to $269.59.
The USDA choice cutout Monday was up $1.93 per cwt at $292.91 while select was up $2.62 at $278.40. The choice/select spread narrowed to $14.51 from $15.20 with 56 loads of fabricated product and 13 loads of trimmings and grinds sold into the spot market.
The USDA said basis bids for corn from feeders in the Southern Plains were down $0.02 to $0.03 at $1.58 to $1.65 a bushel over the May corn contract, which settled at $6.54 a bushel, up $0.10 1/2.
The CME Feeder Cattle Index for the seven days ended Friday was $193.33 per cwt, down $1.05. This compares with Monday’s Apr contract settlement of $200.92 per cwt, up $0.30.