Higher Beef Prices with Higher Prices to Come

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1 Louisiana Cattle Market Update Friday, August 31 st, 2012 Ross Pruitt, Department of Agricultural Economics and Agribusiness LSU AgCenter Higher Beef Prices with Higher Prices to Come As Labor Day weekend arrives to signal the end of the summer grilling season, the boxed beef cutout value has increased in price over the past few weeks as retailers ordered beef to feature for their Labor Day specials. The value for the cutout has risen about $16/cwt since the beginning of August to finish last week over $193/cwt before retreating to $191/cwt as needs for Labor Day had been filled. Boxed beef prices typically weaken following Labor Day, so maintaining that strength will be important to help ease the losses that feedlots are expected to experience for the foreseeable future as corn prices hover around $8/bu. While quarterly demand indices for beef have been at least even, if not above, with year ago levels since the 3 rd quarter of 2010, retailers are still only purchasing beef as needed. In recent weeks, renewed strength in the price of beef loin and rib components of the cutout have provided support to the price of boxed beef. Rib prices are 13% higher than a year ago while the price of loins is 5% higher. Other primal components of the beef carcass such as the brisket and chuck are higher than last year, but it s the middle meats (the loin and rib primals) that have the contributed to the recent run-up in prices. Strength in the middle meats will be needed to help push boxed beef prices above $200/cwt. Consumers are already paying record or near-record prices for beef, pork, and chicken. Current retail prices will only get higher in the coming months as the impacts of this year s drought start to be reflected at the meat counter. The question then becomes how much more can consumers afford to pay in the current economic climate for proteins? Although consumers don t see the price of boxed beef at the retail level, there is still a psychological barrier that those making wholesale/retail purchasing decisions face with regards to breaking the $200/cwt threshold for Choice boxed beef. If historical patterns hold, current April 2013 live cattle futures imply a boxed beef price of approximately $205/cwt. As discussed earlier this year, the question is will processors be able to continue to increase the value of the beef cutout faster than the cost induced rise in the price of fed cattle. The question was then largely focused on the protein industry. Now, it s a different proposition with consumers facing increased food prices, and not just from protein sources, as a result of this year s drought.

2 A reminder that the seminars conducted by Cooperative Extension Services of Mississippi State and LSU AgCenter begin Thursday, September 6 th at 12 noon and run every Tuesday and Thursday through September 27 th. The seminars will be available (and archived for later viewing) at: If you need more information on these educational seminars, feel free to contact me. Corn futures finished the week lower as traders booked profits and prices above $8/bu continue to limit demand from domestic and foreign end users. Support was present from other grains during the week, but traders were unable to use that to help corn move higher. Live cattle futures were largely higher on the week. Technical trading helped provide strength for much of the week as concerns about retail demand are still present in the market. Feeder cattle futures were higher on the week resulting from weakness in corn futures and strength from the live cattle pit. Cash fed cattle trade on Thursday and Friday with prices largely $2 to $3/cwt higher than last week. Live prices ranged from a low of $118/cwt in Iowa up to $123.50/cwt in Colorado and Nebraska. Prices in Oklahoma and Texas were $122/cwt to $123/cwt. Dressed prices were $188/cwt to $190/cwt in Iowa and Nebraska with some sales in Kansas at $194.50/cwt.

3 $/Cwt $/Cwt Week Ending Friday, August 31, 2012 Feeder Steer Prices* $200 $150 $100 $50 $ lbs lbs lbs $ $ $ $ $ $ $ $ $ *Prices are for Medium and Large 1-2 Steers **Mississippi prices are for midpoint of and steers Note zero values in table represent no reported sales for that weight group. Source: USDA AMS Mississippi Cull Cow Prices $80 $75 $70 $65 $60 Breaking Boning Lean This Week $72.00 $79.00 $73.00 Last Week $72.50 $79.00 $73.00 This Week Last Week Source: USDA AMS

4 Table 1. Futures Prices Live Feeder Month Cattle Change* Cattle Change* Corn Change* September $ /4 17 October $ $ November $ December $ /4-2 1/2 January $ February $ March $ /2 April $ $ May $ /2 June $ July 780 1/2-20 3/4 August $ $ Source: DTN * Change is from the previous Friday s close

5 Table 2. State and National Market Information Commodity This Week Last Week Last Year 5 Area Fed Steer Price Live $ $ $ Dressed $ $ $ Oklahoma City Feeder Cattle Prices cwt Med and Large #1 $ $ $ cwt Med and Large #1 $ $ $ Boxed Beef Cutout Values (weekly average) lb Choice cutout $ $ $ lb Select cutout $ $ $ U.S. Pork Cutout Value $ $ $ Georgia Dock Broilers $ $ $ Georgia B/S Breasts $ $ $ Georgia Leg Quarters $ $ $ Meat production (million lbs) Beef Pork Slaughter (1,000 head) Cattle Hogs 2,282 2,265 2,136 Broilers/Fryers 156, , ,693 Average Dressed Weight Cattle Hogs /25/2012 8/18/2012 8/27/2011 Poultry Placements (in thousands) 1 LA Broiler Egg Sets 3,167 3,135 3,167 US Broiler Egg Sets 191, , ,007 LA Broiler Chick Placements 2,836 2,796 2,993 US Broiler Chick Placements 161, , ,943 Source: USDA Agricultural Marketing Service, USDA National Agricultural Statistics Service and Livestock Marketing Information Center 1 Note the placements numbers are lagged by one week prior to publishing.