Daily Livestock Report sees positive price trends, indicating increase beef demand
Beef demand through the beginning of the year has been what the Daily Livestock Report (DLR) called “a mild positive surprise” so far.
“Last January, Choice beef values were under pressure, as beef production was on its way to posting a six percent increase from the first quarter of 2016,” DLR reported. “This year, beef production is again on a path to be up, with the Livestock Marketing Information Center projecting a 3.9 percent gain.”
While January 2017 saw a decrease in Choice beef product values, beef prices largely held for 2018, said the report.
“There was a bit of a hiccup in values in mid-January, as beef production was up eight percent during the third week of the month compared to a year earlier,” they commented. “Since then, weekly production has been up three percent, which product demand seems to be taking in stride.”
When looking at the beef carcass, DLR said chuck value has provided strong support for overall Choice beef values.
“The increase in chuck value during the last two weeks of January was very atypical relative to normal seasonal trends,” they noted.
Typically, chucks are merchandized through grocery stores as roasts and ground beef, and DLR said, “Recent price trends suggest product movement has been good through this channel.”
DLR emphasized the majority of the increase thus far has come from additional cows harvested at heavier weights.
“Weekly cow slaughter for January was up 6.7 percent from a year earlier,” they noted. “Cow carcass weights were 2.5 percent heavier producing a rough estimate for beef production coming from cows increasing by 9.3 percent.”
Further, DLR noted bulls accounted for a 3.6 percent increase in beef production in January.
“Cow and bull beef production is the primary source of the beef trimmings and the tally for this category of beef production is up 8.8 percent from January 2017,” DLR added.
DLR continued, “Even with this increase in supply, lean trimmings prices have sustained an uptrend. More chucks being sold as roasts instead of being ground for trimmings probably is a factor limiting pressure on trimmings values.”
The normal seasonal trend for chuck values moving through early spring is a downward trend, meaning more chucks will likely be used in ground beef production, putting pressure on lean trimmings values.
“Historically, when cow and bull beef production increases by more than 10 percent in a year, lean trimmings prices are vulnerable to going to a discount in the Choice beef cutout,” DLR said.
Lean trimmings values are highly variable, DLR added, noting January 2018 lean trimmings prices were a premium to the choice beef cutout by six cents a pound. In 2017, that premium was eight cents in 2017, but in 2016, trimmings were discounted 26 cents a pound to the Choice carcass value.
DLR further looked at the interval between 2012 and 2018, saying the only years where increases in chuck roll prices were seen were in 2016 and 2018.
“In 2016, chuck roll prices declined by 16 percent by the end of March,” they said. “Also in 2016, 90 percent lean trimmings prices actually went up from January to March by eight percent.”
Despite the increase, they were still discounted by seven cents from the choice beef cutout.
“On the supply side of the market, first quarter 2016 cow and bull meat production was only up 1.5 percent from four quarters earlier – a modest gain compared to this year,” DLR said.
Look for the latest from the Daily Livestock Report by visiting dailylivestockreport.com.
Saige Albert, managing editor of the Wyoming Livestock Roundup, compiled this article and can be reached at firstname.lastname@example.org.