Weekly average USDA choice 600- to 900-pound boxed beef prices are falling counter-seasonally amid marketplace ideas that consumer demand is fading.
To be clear, the weekly average price listed by the USDA remains higher than last year and well above the 2019-2023 average, but it is falling.
WORRYING TO CATTLE, BEEF PRODUCERS
The falling choice beef price is a concern to beef packers since their margins already are calculated to be deeply in the red when compared with open-market weekly negotiated fed cattle prices. Packer margins may be quite different when calculated against the cost of their own cattle or those that were contracted under a variety of systems and grids.
Cattle feeders also could be concerned with slaughter steer prices falling as well. Breakeven prices will be different with each feedlot and with each pen of cattle in that feedlot, but declining prices will always worry feedlot managers.
THERE’S STILL TIME
Looking at a graph of weekly USDA choice boxed beef prices from the Livestock Marketing Information Center in Denver, it’s clear that a seasonal push to the annual high generally starts in the last week of March.
Last week’s choice carcass price was $313.76 per cwt, down $5.70, or 1.78%, from $319.46 a week earlier but up $15.23, or 5.10%, from $298.53 a year earlier and up $71.50, or 29.5%, from the previous five-year average of $242.26.
Last year, the annual top came with the first week of July at $329.96 per cwt, yet there wasn’t a sharp rise like there is in the line for the five-year average.
That means there still is time for the spring rally to commence and reverse the current decline in choice beef prices.
WHAT IF?
If consumer demand has faded, and falling live cattle futures indicate there is some of this in the market, the implications up and down the cattle/beef production chain could be huge.
Already, a strong US dollar apparently has reduced US beef’s competitiveness abroad, so if US consumers step back a bit then packers will be forced to cut production in order to stem the flow of dollars out the door. This could back up cattle in the feedlot where they will consume more feed and just get bigger, reducing the packer’s need to kill more cattle.
Reduced feedlot returns would reduce their demand for feeder cattle and could even force some out of business if they’re committed to supply the packer with a certain number of fed cattle that cost too much to buy and too much to feed.
Many still believe in continued strong consumer demand, though. It’s what makes a market.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $200.11 per cwt to $200.19, compared with last week’s range of $202.97 to $210.18 per cwt. FOB dressed steers, and heifers went for $317.17 per cwt to $318.05, compared with $318.80 to $327.62.
The USDA choice cutout Monday was up $2.96 per cwt at $313.73 while select was up $1.41 at $303.97. The choice/select spread widened to $9.76 from $8.21 with 62 loads of fabricated product and 22 loads of trimmings and grinds sold into the spot market.
The USDA-listed the weighted average wholesale price for fresh 90% lean beef was $377.31 per cwt, and 50% beef was $108.71.
The USDA said basis bids for corn from feeders in the Southern Plains were up $0.05 to $0.07 at $1.27 to $1.38 a bushel over the Mar corn contract, which settled at $4.82 1/2, down $0.08 3/4.
The CME Feeder Cattle Index for the seven days ended Friday was $279.37 per cwt, up $0.53. This compares with Monday’s Mar contract settlement of $272.30, up $4.35 and Apr’s $272.02, up $4.47.