Hide, Offal Values Tracking Average At Lower Level

It looks like it will be October before steer hide and offal values cross above last year’s declining rate after narrowly avoiding such a cross three weeks ago.

Total average prices for steer hide and offal on a live animal basis continue to follow the trend of the 2010-2014 weekly average but at a much lower level.

The byproduct value is the total value of all non-meat items produced from an animal such as cheek meat, hearts, livers, tripe, tongue, meat and bone meal, edible and inedible tallow and hides.

Exports are the driver of most byproduct values as variety meats have a much higher consumer preference in overseas markets.  Byproduct values are also a factor for packer margins, often marking the difference between profitability and operating at a loss.

Currently, at $11.32 per cwt live weight, steer hide and offal value is $0.82, or 6.75%, below 2015’s $12.14 and $2.35, or 17.2%, below the prior five-year average of $13.67.  However, the byproduct value has increased $0.75 per cwt, or 7.10%, from its first-of-the-year level of $10.57.

 

EXCHANGE RATES AND SLAUGHTER

 

A rising US dollar index has not dissuaded foreign customers from purchasing US goods, and this buying interest has been said to be a main factor driving this slow but steady rise in steer byproduct values this year.  Some market analysts expected this year’s move to follow the average rather than last year, in spite of rising slaughter rates.

The US has slaughtered 4.3% more cattle from January to June this year, compared with the first half of 2015, AMS data showed.  This has increased the volume of byproducts available for export, precluding any major price jumps and even applying price pressure.

However, despite the increased production, it is possible for these values to post year-over-year gains during the second half of 2016, LMIC analysts said.  The key is exports – if exchange rates do not get in the way.

 

HOG BYPRODUCT VALUES

 

Hog byproduct values also have mimicked the 2010-2014 average so far this year, rising to a July peak and then stepping back a bit.

Those values have increasingly tracked above year ago since mid-April.  Currently at $4.00 per cwt after peaking at $4.11 two weeks ago, this is $0.32, or 8.70%, above a year ago but $1.71, or 30.0%, below the previous five-year average of $5.71.

A significant 8% increase in hog slaughter during 2015 negatively affected pork byproduct values, the LMIC said.

More favorable exchange rates for international consumers are helping to support pork byproducts, along with a slowed growth in hog slaughter this year.

These hog byproduct values are expected to maintain their current strength but their rate of growth may moderate during the second half of 2016.

 

CASH CATTLE MARKETS REMAIN QUIET

 

Cash cattle markets Tuesday remained quiet with no defined packer bids and asking prices of $122 per cwt on a live basis and $192 dressed.  Cattle traded last week $1 to $2 per cwt higher, at $118 to $119 live and $188 to $190 dressed.

The USDA’s choice cutout Tuesday was $0.72 per cwt higher at $199.89, while select was up $0.22 at $192.06.  The choice/select spread widened to $7.83 from $7.33 with 30 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Monday was $147.17 per cwt, up $0.69.  This compares with the Aug settlement Tuesday of $150.17, up $1.05.