While wholesale beef prices are struggling to make seasonal gains, it’s too early to tell if it is because of reduced demand linked to the Covid-19 Coronavirus, said Derrell Peel, agricultural economist for Oklahoma State University, in a letter to Extension agents called Cow/Calf Corner.
It is certainly possible that there has been some bearish effects on beef prices, especially on export demand, Peel said. Effects on domestic demand may be forthcoming.
It will be important to watch consumption and supply in coming weeks to see if beef and cattle market expectations will have to be revised significantly, Peel said. There are a multitude of market factors to sort out including: new trade agreements, macroeconomic changes (stock market, interest rates, etc.), exchange rates, African Swine Fever and others that will make it more difficult to determine the more direct effects of COVID-19 on beef markets.
BEEF PRICES TYPICALLY RISE
Wholesale beef prices typically increase from February into March but have showed only scant gains from the February low three weeks ago, Peel said.
Last week, the USDA’s average choice boxed beef cutout (basically, the wholesale price) was $206.94 per cwt, up $1.23 from the February low, but 8.0% below the same time last year, he said.
Current wholesale values are lower year over year for all beef primals, Peel said. Ribs have moved seasonally higher since February but still are 10.4% below last year.
Loins likewise have increased seasonally but were 10.8% lower year over year last week, he said. Briskets were down the most, now 13.8% less than last year.
Chucks are down 7.0% year over year, Peel said. Rounds have been the strongest and were above year earlier levels until last week, dropping to 1.3% less than the same time last year.
The USDA’s select boxed beef value was $201.80 per cwt last week, down 7.5% year over year, he said, with the general pattern of year to year price comparisons similar to Choice.
The choice/select spread reached the seasonal low in late January at $1.92 on a weekly basis, two weeks earlier than the usual mid-February low, Peel said. The spread widened seasonally to $5.14 in the first week of March.
The choice/select spread typically widens to the first of two seasonal peaks in late May or early June before dropping in the summer and bouncing back again in the fourth quarter of the year, he said.
MEANING?
Wholesale price weakness does not necessarily mean beef demand is lower, Peel said. Beef production is up 5.1% year over year for the first eight weeks of 2020. Prices normally would be pressured with higher production even with stable demand.
Increased production comes from a 1.3% year over year increase in cattle slaughter so far this year along with increased carcass weights, he said. Fed beef production is up with steer and heifer slaughter up 0.7% year to date combined with steer carcasses averaging 19.6 pounds heavier and heifer carcasses averaging 10.6 pounds heavier.
CATTLE, BEEF RECAP
Cash cattle traded in the Plains this week at $110 per cwt on a live basis, down $3 from last week, and at $175 to $176 dressed, down $5 to $6.
The USDA choice cutout Wednesday was up $0.08 per cwt at $207.17, while select was off $2.22 at $196.49. The choice/select spread widened to $10.68 from $8.38 with 102 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Tuesday was $133.05 per cwt, down $0.21 from the previous day. This compares with Wednesday’s Mar contract settlement of $123.32, down $4.42.