Now that the Independence Day holiday with its emphasis on grilling is past, where can traders expect the beef market to go from here, asked David Anderson, Extension economist at Texas A&M University, in a letter to Extension agents through the Livestock Marketing Information Center called In The Cattle Markets.
It’s clear that the dog days of summer are here, on top of the abnormal heat wave many in the US are feeling, and tighter beef supplies will remain, Anderson said.
CHOICE CUTOUT DECLINES
The choice cutout typically declines this time of the year, as do most primal cuts, he said. Monthly retail choice beef prices climbed to a record high of $8.13 a pound in June, on top of May’s record high $8.08.
Falling wholesale beef prices may lead to some declines in retail prices in the coming two months, Anderson said. Declining wholesale beef prices may lead to lower fed cattle prices, as well, although packers are caught in the cyclical bind of declining cattle numbers and may not be able to cut cattle prices.
In the meantime, grilling season is a known demand driver for the beef market, especially for some cuts, he said. But, retailers and wholesalers still have to sell beef the rest of the year, too, and there are some interesting happening in wholesale and retail beef markets that will have implications for cattle prices over the next couple of months.
The weekly average choice cutout dropped to $309.65 per cwt for the week ended July 14, Anderson said. This was $29.98 lower than its peak for the year at $339.93 per cwt for the week of June 16.
MIDDLE MEATS PRESSURED
All primal cuts have declined over the last four weeks, but the biggest declines have been in the middle meats and account for the largest share of the total cutout decline, he said. The rib and loin primal cuts are $64.75 and $52.23 per cwt, respectively, from their highs during the last month.
One of the most interesting primal cuts this year has been the short plate, Anderson said. Over the last five years, the short plate increased in value by about 40% from the beginning of the year until about June before declining seasonally for the rest of the year.
This year short plate prices climbed 60% before declining over the last four weeks, he said.
The choice/select spread has been greater than $30 per cwt over the last four weeks, well above the five-year average, Anderson said. The historically wide spread likely is because of tighter supplies of choice beef compared with a year ago amid continued consumer demand.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $179.20 per cwt to $185.90, compared with last week’s range of $178.00 to $188.83 per cwt. FOB dressed steers, and heifers went for $284.31 per cwt to $292.45, compared with $280.35 to $289.99.
The USDA choice cutout Tuesday was up $0.06 per cwt at $304.22 while select was up $0.56 at $277.55. The choice/select spread narrowed to $26.67 from $27.17 with 120 loads of fabricated product and 30 loads of trimmings and grinds sold into the spot market.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.90 to $2.05 a bushel over the Sep corn contract, which settled at $5.57 1/2 a bushel, down $0.03.
The CME Feeder Cattle Index for the seven days ended Monday was $241.62 per cwt, down $0.31. This compares with Tuesday’s Aug contract settlement of $243.22 per cwt, down $0.02 and Sep’s $246.35, down $0.27.