As the summer grilling season gets underway following the Memorial Day holiday, beef and cattle traders expect the annual peak in the weekly USDA beef cutout value to come soon.
It’s already historically late.
HISTORICAL MOVES
Data shows the weekly choice beef cutout price usually drops about 10% from its annual high in May or June to its summer low in July or August. It has dropped as much as 35% in the COVID year of 2020.
As much as a fourth-quarter rise in the choice cutout is discussed in the markets, the truth is it doesn’t hold a candle to the May-June peak, or a secondary peak in August ahead of the Labor Day weekend.
However, the timing of those two peaks is hard to guess ahead of time.
For instance, last year, the annual price peak came next week at $339.93 per cwt while the 2018-2022 average peak came in the third week of May at $299.07 per cwt, according to USDA data compiled and published by the Livestock Marketing Information Center in Denver.
And the secondary peak last year came the last week of August at $317.04 per cwt, versus the previous five-year average of $257.31 coming in the same week.
Just as the peak in the weekly choice cutout price is hard to guess ahead of time, so is the valley. Last year, the mid-summer slump bottomed in the second week of August at $302.41 per cwt.
According to the 2018-2022 average, the mid-summer slump bottoms the third week of July at $230.85 per cwt.
THINGS AREN’T NORMAL ANYWAY
But things aren’t “normal,” according to the five-year average anyway. This year’s weekly USDA choice beef cutout price is more closely aligned with last year’s weekly average than it is to the previous five-year average.
Last year, and by extension this year, the weekly beef price is higher than the average, meaning prices could be supported through the rest of the year, and seasonal highs and lows could be more muted in their distance from each other.
Fed cattle supplies currently are adequate for domestic demand and the light export shipments allowed by the strong US dollar. But once fed supplies tighten to reflect a smaller US cattle herd, beef production from the packers will tighten as well.
At the same time, consumers have shown a willingness to spend money on choice beef, surprising many analysts and traders who expected inflation to crowd many out of the choice market. If this changes, the choice cutout could suffer.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $186.37 per cwt to $190.17, compared with last week’s range of $186.00 to $191.52 per cwt. FOB dressed steers, and heifers went for $292.86 per cwt to $297.04, compared with $291.58 to $299.90.
The USDA choice cutout Tuesday was up $0.79 per cwt at $318.21 while select was off $0.42 at $300.62. The choice/select spread widened to $17.59 from $16.38 with 116 loads of fabricated product and 29 loads of trimmings and grinds sold into the spot market.
The weighted average USDA listed wholesale price for fresh 90% lean beef was $359.25 per cwt, and 50% beef was $72.95.
The USDA said basis bids for corn from feeders in the Southern Plains were up $0.04 at $1.46 to $1.56 a bushel over the Jul corn contract, which settled at $4.49 1/2 a bushel, down $0.02 1/4.
No delivery intentions were posted Tuesday for the Jun live cattle futures contract.
The CME Feeder Cattle Index for the seven days ended Monday was $253.39 per cwt, up $0.51. This compares with Tuesday’s Aug contract settlement of $257.65, down $1.00.