Choice Cutout Aiming For Normal

The USDA’s choice cutout value appears to be aiming to resume longer-term average levels as supplies increase and the year-end holidays are winding down.

While prices of individual beef cuts fluctuate seasonally, the USDA’s overall choice cutout value tends to remain in a narrow range.  At least it did in the 2009-2013 period when fresh supplies were more abundant.  They now are focusing on a post-holiday consumer move toward more abundant, if less expensive, pedestrian cuts.

This week’s steep rise in the USDA’s boxed beef cutout value notwithstanding, the overall beef market currently is pointed lower.




Comparing a graph of the overall beef cutout value to this one of wholesale boneless beef ribeye prices shows a more seasonal supply/demand ratio.

Right on cue, prices for boneless ribeyes fell away the last two weeks as restaurants and retail grocers completed their holiday-inspired buying and resumed their purchases of the more abundant chucks, rounds and ground beef.

Once the holidays are in the rear-view mirror, consumers are faced with paying the bills and dropping back into a routine of school, cold weather and no holiday.  Valentine’s Day comes in February, but there is no defined meat that goes with it.  Restaurants see an uptick in business as the family cook gets a night off, but it’s hardly an event worthy of higher ribeye prices.




What does happen, though is a slower uptick in wholesale ribeye prices as retail grocers book product for the spring grilling season.  While spring and early summer are seasons and not holidays, there are a couple of embedded holidays.

Grocers will trot out turkeys and hams for the Easter holiday, and certain markets may have more lamb or briskets.  But wholesale ribeye markets are eyeing the back yard grill, and wholesale ribeye prices continue to rise.

For that reason, the overall beef cutout value shows a seasonal spring rally as grocers feed a benign demand for roasts while stocking up on steaks.




Cash cattle markets remained quiet Tuesday after trading last week at $122 to mostly $124 per cwt on a live basis, up $4 to $6 from the previous week.  Volume was light to moderate as sellers were asking $125 to $126.  In dressed markets, cattle traded at $199 to mostly $200, compared with the previous week’s range of $182 to $184.

Some think product values are in the process of bottoming after two weeks of sharply reduced production.  There are ideas of increased beef features in January, which could support the cutout.  However, large volumes of trimmings, chucks and rounds in cold storage could provide ample inventory for such features.

The USDA reported sharply higher wholesale beef prices again on Tuesday, but the volume was low.  Choice was up $5.08 per cwt from Monday to $206.17, and select was up $4.46 at $197.66.  The choice/select spread widened to $8.51 from $7.89 on Monday, and there were 91 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Monday was $157.05 per cwt, down $0.14.  This compares with the Jan settlement Tuesday of $162.47, down $0.17.