May 18, 2020

In The Cattle Markets

Josh Maples, Assistant Professor & Extension Economist

Department of Agricultural Economics, Mississippi State University

Processing Increase and Beef Values

The month-long rally in the Choice Boxed Beef Cutout Value (BBCV) peaked at $475.39 per cwt on May 12 last week according to the USDA National Daily Boxed Beef Cutout Report. By Friday, the BBCV was $434.32. This report includes daily negotiated prices and volume of boxed beef cuts delivered within 0-21 days using average industry cutting yields.

The daily Composite Primal Values each turned slightly lower last week. Even with the sharp increases over the past month, the relative changes among cuts continued to show the differences between retail and foodservice sectors. The Rib value surged to a high of $546.59 on Thursday and declined to $522.81 on Friday. This was a 58 percent increase over the daily average from the first 11 weeks of 2020. The Chuck and Round experienced the largest increases at 144 percent and 136 percent above the first 11 weeks of 2020 using the daily negotiated value.

The recent declines in the BBCV coincide with continued improvement in processing totals. The Estimated Daily Slaughter report showed an estimate for last week at 499,000 head. While still 25 percent lower than a year ago, this would be a 10 percent improvement over the week prior. Perhaps more importantly, it would mark the second consecutive weekly increase after five straight weeks of declines. A continuing loosening of the logjam at the processing sector is critical to the cattle and meat sector and would support increased cattle slaughter and increased beef availability.

The weekly USDA National Comprehensive Boxed Beef Cutout encompasses more transaction types than the daily report. A look at the loads by type of sale in the comprehensive report sheds some light on how the flow of beef is traded. In the comprehensive report, USDA breaks out sales into four types: Negotiated sales delivered in 0-21 days, Negotiated sales 22+ days, Formula sales, and Forward Contract sales.

The average weekly number of loads sold over the past five weeks in the comprehensive report was 4,675 which was 32 percent lower than the same time period in 2019. Broken out by transaction type, the biggest reduction has been in the Negotiated sales delivered in 22 or more days which averaged 423 loads over the past five weeks (down 64 percent from a year ago) and Forward contract sales which averaged 76 loads (down 65 percent from year ago). Formula sales averaged 2,509 loads (down 27 percent). The smallest percentage decrease by type was in Negotiated sales for delivery within 21 days which averaged 1,666 loads (down 18 percent from 2019). Given the uncertainty about both available supply and expected demand, it is likely not surprising that sales for delivery further into the future have shown the biggest decline.

The Markets

A continuing recovery in processing capacity would be welcome news for cattle producers. Cattle market prices showed some improvement last week. Live steer prices were up about $8 per cwt over the week before according to the 5-area weekly weighted average. Local auction prices for feeder cattle were also higher.