Choice Beef Production Down, Not Out

Choice beef production took a dip in the second week of June, but it’s too early to tell if it’s an outlying move or a seasonal peak coming early.

There are those who say that an aggressive slaughter rate by beef packers is pulling down the percentage of cattle yielding choice carcasses.  Perhaps it is, but one week of declines isn’t enough data to say for certain.

The data do show a peak the first week of June at 72.47% of all graded beef followed by a 71.41% reading in the second week of June.

The data also show a 2011-2015 average peak in the percentage of choice beef among all beef produced that week in the second week of July at 65.25%.  This could be called the seasonal high week.

Last year, the peak in grading percentage came the third week of July at 72.18%.

However, even if the weekly average choice percentage drops below last year in the next few weeks, it hardly means the country is running short of choice beef by historical standards.  It just means choice beef production is below a year earlier.

Choice beef production this year is patterning itself after the 2011-2015 average, but at a higher level.  The latest data, for instance, show that last week’s choice percentage of 71.41% was 6.91 percentage points above the average, while the difference in the first week of January was 7.55 percentage points.

 

CONSUMER PATTERNS HARD TO CHANGE

 

It could be argued that the high demand for choice beef was part of the reason for the 11% pulldown in the US’ frozen beef stocks in May, when compared with a year earlier.  This is possible, but hard to pin down since the USDA’s monthly Cold Storage report only lists totals in boneless beef or totals in beef cuts by region and not by grade.

It’s also possible that consumer tastes are shifting a little early this year, but, again, this would be hard to pin down since there is no nationwide data.  Such a conclusion might be reasonable in light of a lower amount of grilling that takes place in the heat of summer.

However, there is no real reason for consumers to set aside their taste for choice beef over select or no-roll just because it’s hot outside.  Data has shown a propensity to shift to lower-quality beef of lower quality/cuts if their economic condition changes, but not because of any seasonalities.

The hot weather may cause them to cut back on the volumes they purchase, but that is all.

 

CASH CATTLE QUIET

 

Fed cattle sold on the livestock exchange video auction last Wednesday at $123.00 per cwt for one- to nine-day delivery, down from $138.82 on June 8, the last time trading was reported on the exchange.

Cash cattle traded last week at $122 to $123 per cwt on a live basis, down $10 from $132 to $133 the previous week, and at $195 to $196 dressed, down $9 to $10.

The USDA’s choice cutout Tuesday was down $4.66 per cwt at $233.91, while select was off $2.40 at $215.26.  The choice/select spread narrowed to $18.65 from $20.91 with 96 loads of fabricated product sold into the spot market.

The CME Feeder Cattle index for the seven days ended Monday was $146.42 per cwt, up $0.58.  This compares with Tuesday’s Aug settlement at $144.87, down $4.57.