Market Shows Lean Beef Tightness

Beef and cattle markets always attempt to balance supply and demand, and the current increased arbitrage between fed and non-fed beef markets indicates a very unusual market situation – one reflecting an excess in fat and a shortage of lean.

Derrell Peel, Oklahoma State University livestock marketing specialist, in a letter called Cow-Calf Corner, said the decline in boxed beef price is seasonal during the hottest part of the summer, but choice boxed beef has decreased by 5.4% since July 4 to about $312.50 per cwt, 3.4% higher than last year.

 

MIDDLE MEATS DRIVE

 

Beef tenderloin, the highest-value cut, has been quite flat and lower than last year for much of 2024.  This weakness is a bit concerning to Peel and may provide an important indicator of tenderloin demand going into cooler weather and the seasonal pick up in restaurant traffic.

Overall, rib primals are priced about 3.4% higher year over year, and loin primals are averaging 1.4% lower, Peel said.  Middle meats from the rib and loin are the heart of boxed beef values.

Most chuck products are priced either about the same as last year or lower, he said.  One notable exception is the mock tender, which currently is priced well above year ago.

 

LEANER CUTS HIGHER

 

But overall, chuck primal values were up 6.6% year over year in July, Peel said.  In contrast, round values were mostly higher.  Overall, round primal values were nearly 21% higher.

While overall beef production is down 1.6% year over year so far, the modest decreases in steer and heifer slaughter combined with dramatically higher steer and heifer carcass weights has led to a 0.9% year over year increase in fed beef production, Peel said.

Increased days on feed contribute to the heavy carcass weights and to an average of nearly 22% yield grade 4/5 cattle, he said.  An average of 87% of fed cattle are grading choice and prime.  Fed beef is about 84% of total beef production.

Non-fed beef typically makes up the remaining 16% of total beef production and consists of cow and bull slaughter, Peel said.  Non-fed beef production is down nearly 13% year over year.

Cow slaughter is down more than 15%, and bull slaughter is down nearly 8%, he said.  Non-fed beef production is the source of 90% lean trimmings, a major ingredient for ground beef.

The current wholesale price of 90% lean trimmings is record high and higher than several of the round cuts, Peel said.  The market is attempting to make up for the shortage of lean beef in the non-fed market by pulling more lean beef from fed beef supplies.

 

CATTLE, BEEF RECAP

 

The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $190.00 per cwt to $200.62, compared with last week’s range of $188.00 to $198.00 per cwt.  FOB dressed steers, and heifers went for $296.77 per cwt to $304.24, compared with $296.12 to $308.96.

The USDA choice cutout Thursday was down $1.98 per cwt at $312.79 while select was down $2.70 at $297.46.  The choice/select spread widened to $15.33 from $14.61 with 113 loads of fabricated product and 15 loads of trimmings and grinds sold into the spot market.

The weighted average USDA listed wholesale price for fresh 90% lean beef was $371.30 per cwt, and 50% beef was $158.26.

The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.46 to $1.70 a bushel over the Sep corn contract, which settled at $3.82 a bushel, down $0.00 3/4.

The CME Feeder Cattle Index for the seven days ended Wednesday was $257.82 per cwt, down $0.87.  This compares with Thursday’s Aug contract settlement of $253.15, down $4.10.