The monthly spread between the wholesale and retail prices of beef is wider than either last year or the preceding five-year average, according to the USDA’s Agricultural Marketing Service and the Economic Research Service.
The USDA data is collected, formulated and released by the Livestock Marketing Information Center in Denver. A graph of the monthly price spread shows a narrower-than-normal relationship between wholesale and retail values for beef this year, compared with previous years.
FUTURE SPREAD UNCERTAIN
But, while the wholesale-to-retail price spread has been higher than last year or the average all year, the graph gives little indication of future relationships since the 2016-2020 average tends to decline while the spread widened last year.
As of August, the wholesale-to-retail beef price spread was $1,573 per 1,000 pounds, the LMIC release showed. This was up $338, or 27.4%, from $1,235 in August 2021 and up $292, or 22.8%, from the previous five-year average of $1,281.
The lowest reading this year was in January at $1,476 per 1,000 pounds, the data showed, and the highest was in March at $1,651.
PRODUCER GETS THE SHORT END
However, cattle producers aren’t seeing a lot of that wholesale-to-retail price spread. Monthly USDA data showed producers of choice steers this year were receiving a little more than 40% of the retail price.
Over the last nine years, it’s been worse with the narrowest relationship at 31.2% in June of 2020, the data showed.
It’s also been much better. The data indicated that choice steer producers got 59.8% of the retail beef value in November of 2014. That gave way to a quick, but uneven, decline to 39.2% in October of 2016.
That was followed by a stretch where peak values kept declining slightly until 2020 brought the slide into the most recent low. A modest recovery took place after that, but this year’s returns have held in a very narrow range by historical standards.
FEEDLOTS STRUGGLING
Meanwhile, feedlots still have to work at making a living. Choice steer prices, as reported by the USDA, showed an average fed steer price last month of $140.13 per cwt, versus a calculated breakeven value of $141.69.
It’s been worse, and it’s been better this year. In June, the average fed steer price was listed at $138.02 per cwt, versus a breakeven of $140.22.
However, in May, the steer price was $$139.20, compared with a calculated average breakeven of $135.49.
The LMIC estimated breakevens in coming months of $135.99 per cwt in September up to $155.54 in December. At those levels, it will be very hard for producers to see any meaningful returns from strong retail prices, a market analyst said.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $141.00 to $144.73 per cwt, compared with last week’s range of $141.00 to $150.00. FOB dressed steers, and heifers went for $221.34 to $224.93 per cwt, versus $223.30 to $228.00.
The USDA choice cutout Thursday was down $1.13 per cwt at $252.34 while select was down $0.16 at $229.95. The choice/select spread narrowed to $22.34 from $23.08 with 124 loads of fabricated product and 21 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 $2.65 to $2.75 a bushel over the Dec futures and for southwest Kansas were steady at $1.10 over Dec, which settled at $6.77 1/2, down $0.04 3/4.
The CME Feeder Cattle Index for the seven days ended Wednesday was $178.51 per cwt down $1.46. This compares with Thursday’s Sep contract settlement of $179.35, down $0.62.