Disparities between wholesale beef and fed cattle prices have led to calls for greater protectionist policies, but they may not help cattle producers, said a university economist Monday.
University of Wisconsin Economist Brenda Boetel, writing a letter to Extension Agents for the Livestock Marketing Information Center in Denver called In The Cattle Markets, said limiting foreign trade would harm the price of finished cattle.
BACKGROUND
For the week ending May 2, slaughter was estimated at 425,000 head, down 8.6% from a week earlier and 36.8% from the same period in 2019, she said. Beef production declined an estimated 8.3% from the week ending April 11 and 22.8% from the same week in 2019.
Meanwhile, export commitments totaled 426,673 tonnes, up 7.6% over the same period in 2019 and first-quarter fresh and processed beef imports were up just shy of 1%.
THE CALLS
There has been discussion about the differences in beef volumes produced and packaged for food service compared with retail grocery and export. Closing or limiting beef exports does not necessarily mean greater amounts of beef in US retail grocery stores, Boetel said, nor does limiting imports mean greater cattle prices because exported beef is not the same beef that is imported, she said.
Even with beef production down, the importance of keep export and import markets open is vital to the long-term health of the cattle industry, she said.
The US is the only country able to export large volumes of high-quality finished beef, Boetel said. This is because of the millions of acres of highly productive crop and grasslands, as well as a marketing system developed to finish cattle on grain.
The US cattle industry cannot produce, in a cost-effective manner, all the types of beef demanded by the US consumer, she said.
The market has just seen the price effect of the demand switch on primal beef cuts to grocery stores from food service, Boetel said. Loin wholesale prices have increased 20% since mid-March, whereas chuck prices have increased 55%, partly because of the use of chuck for ground chuck sold at retail.
US ground beef typically is a combination of 50% lean trimmings from grain-fed cattle and 90% lean trimmings from grass-fed cattle or cull cows, she said, but without beef imports, there would be less 90% trimmings, and higher-valued cuts would need to be ground to produce lean ground beef.
Since that higher-valued beef can be exported for a higher price and then lean beef imported at a lower price, the overall value for beef is greater, and the cattle producer benefits from higher beef exports, she said.
And, stopping imports and exports will not necessarily equate to greater quantity at the grocery store, regardless of the value of the exports to the producer, Boetel said. The US typically imports a greater quantity of beef than it exports, so limiting trade will reduce the availability of beef in the US and lower the price for finished cattle.
CATTLE, BEEF RECAP
Cattle traded this week at $95 to $110 per cwt on a live basis, up $1 to $5 from last week’s range. Dressed-basis trading was seen at $145 to $150 per cwt, steady to down $5.
The USDA choice cutout Wednesday was up $20.19 per cwt at $449.18, while select was up $21.25 at $431.96. The choice/select spread narrowed to $17.22 from $18.28 with 71 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Tuesday was $119.50 per cwt, down $0.09. This compares with Wednesday’s May contract settlement of $124.10, up $4.50.