Cattle And Beef Markets Post Significant Gains


Paul Dykstra, Certified Angus Beef

via Drovers - November 6, 2019


Cattle and boxed beef markets have posted significant gains over the past two weeks in a continuation of what has been an impressive recovery since the unsettled markets of August/September.


Negotiated fed-steers and heifers last week averaged $113/cwt., up $3.00/cwt. over the week prior on 50,000 head sold live. The dressed market averaged $179/cwt. on 14,773 head in negotiated trades.


The market recovery, although a grind, has been an earnest one. Last week’s 5-Area Weighted Average was roughly $2.00/cwt. below a year ago but there’s plenty of room for continued advancement considering the demand side of the boxed beef equation.


Fed-cattle prices are looking to eclipse the year-ago price this week, which has not been achieved since late July. Early reports on Tuesday had already indicated aggressive packer demand with some $115/cwt. live trade reported. The seasonal pattern of the last three years holds a decent bias for this 4th quarter rally with only 2017 posting a lower November price trend. The front-month December CME Live Cattle contract has been convincingly higher, currently $118.80/cwt., running $5.80/cwt. premium to last week’s cash market. It would take some seriously bearish thinking to argue against the fundamental logic of the recent trend.


Carcass cutout values were much firmer again last week with the CAB cutout increased another $2.32/cwt. to average $15.07/cwt. higher than a year ago. The quality spreads continued to place a heavy discount on Select items with a continuation of the Choice/Select spread above $25/cwt. and a CAB/Choice spread at $10.82/cwt.


The latest CAB subprimal report shows a more even price increase across the carcass with CAB ribeyes up only $0.08/lb., predictably slowing a huge 21% run-up since the September 9th summer low. Yet Tuesday action this week showed stronger rib prices again.


The lesser-discussed plate primal contributes just 5% to total carcass weight but led the charge last week with a $4.05/cwt. upswing. Fabrication of the plate yields inside and outside skirts with the latter, more pricey of the two currently fetching $7.10/lb., 14% higher than a year ago and 26% higher than the 3-year average largely credited to export demand.




While U.S. beef exports to China aren’t a factor today, we’re seeing trade impacts through global supply and demand for 90% lean grinding beef. China’s protein needs have shifted toward larger imports as their pork production is waylaid by African Swine Fever. Still, the country’s middle class has grown and along with it, an appetite for beef.


On the supply side the Australian cow herd has been reduced due to longstanding drought conditions, shrinking exports from that country, for which the U.S. and China are customers. New Zealand, traditionally a significant source of lean grinding beef for the U.S., has diverted much of their 90% lean beef exports to China this year while U.S. imports of the same have simultaneously declined.


These factors became evident in 90% lean prices in late July as the expected seasonal price slump didn’t develop as it has in prior years. The recent spike up to $2.45/lb. has grabbed the market’s attention more acutely and will factor toward end user input costs for ground beef ingredients... 


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