Market update
The sideways trade in the fed cattle market continues as the weekly average price last week is yet again $123 per hundredweight (cwt). This marks the 10th week in a row with live fed steer values averaging between $120 per cwt and $125 per cwt.
Carcass cutout prices have traveled a more variable path in the same 10-week period, with the Choice cutout beginning June at $3.32 per cwt and pulling back to $2.72 per cwt, as it dipped to the summer low the week of July 19.
The disconnect between live cattle and boxed beef prices has been the bane of cattle feeders and the production supply chain for multiple months, in terms of net return and the producer share of retail beef dollars. With that said, the fed cattle price trendline through July and early August shows the absence of the normal seasonal downturn we’d anticipate to develop through that period.
Last week’s federally inspected slaughter total was revised to 636,000 head as of Monday, down 0.8 percent from the week prior and 1.2 percent lower than the same week last year. A look at just the fed steer and heifer slaughter shows a more dramatic decline of 4.3 percent in the year-on-year comparison. The cull cow harvest is an indicator of more drought-induced culling, given the 12 percent larger harvest than the same week last year.
A forced slowdown at one major packing plant is partially to blame for the smaller head count, but the cumulative effects of several weeks of disappointing throughput in fed cattle slaughter are adding up. Beef demand is still exceptionally strong, but challenged with the slow production pace.
The boxed beef market provides all of the evidence to support the above claims, as the typical spike in end-product prices jumped out of the gate early in August, with a sharper price surge than in any of the previous five years. The rib primal has driven much of the summer beef market price direction, and it’s once again the major driver in last week’s cutout results.
The Certified Angus Beef (CAB) brand rib primal added a whopping 21-cents per pound to the cutout, overshadowing the strong second place primal loin, which posted a nine-cents per pound increase.
Paul Dykstra is the assistant director of supply management and analysis at CAB. He can be reached at pdykstra@certifiedangusbeef.com.
