The prospect of larger than usual numbers of heavy placements being market-ready later in the summer and into the fall has exerted downward pressure on both fed cattle prices and wholesale beef cutout values. Since peaking in early May at $129.02 per cwt, weekly fed cattle prices have declined steadily to just above $120 per cwt. Despite the recent declines and excluding February and March (when prices were lower year-over-year), monthly fed cattle prices have been higher year-over-year since January 2010. Cattle feeding margins have been negative since May 2011. The lower fed cattle prices have increased the likelihood of further losses to cattle feeders, despite declining feeding costs.
Carcass weights are beginning to increase again after reaching a seasonal low in mid-May. While weights are expected to be higher year-over-year for the remainder of 2013 and into 2014, they may not be double-digit higher (in percentage terms) as they have been recently. The recent increases in dressed weights have been attributed to the positive effects of increased use of beta-agonist on final weights for about a year or so. Beta-agonist use is not likely to increase at the same rate as in the recent past, so weights should likewise not increase as much. However, it is possible that the greater placement of over-800-pound feeder cattle on feed could also result in heavier dressed weights, contributing to further relatively large year-over-year dressed-weight increases.
Between mid-June and early July, Choice and Select cutout values moved in opposite directions, thus narrowing the spread between them—Choice cutout values are declining, while Select cutout values are generally increasing. Byproduct values are at near-record levels and are contributing to positive packer margins. The price of 50-percent trim, though also well below record levels, has again reached the levels observed just before the media coverage of Lean Finely Textured Beef in March 2012 triggered a price decline. The Livestock Market Information Center suggests several reasons for the increased prices for 50-percent trim. Among them is the large number of cows being slaughtered, a primary source of processing beef to blend the 50-percent trim to make ground beef products. Other reasons include disruptions in the supply of trim from Canada due to the recent flooding and increased use of 50-percent trim in U.S. packers’ ground-beef blends. Retail beef prices have declined since peaking in March, in part due to unfavorable grilling weather and beef prices that are high relative to other animal proteins. However, June retail prices jumped to $5.29 per pound, near the March record of $5.30, likely due to the run-up in the price of 50-percent lean trim.