In spite of tighter supplies, the fed-cattle market continues to struggle, with prices last week averaging about $81.20 per hundredweight compared with $82.10 the prior week. Federally inspected slaughter numbers were down about 1 percent from the previous week and 3 percent from those during the same week last year. Average slaughter weights were essentially unchanged from a week ago and a year ago, meaning beef production also dropped slightly.
Wholesale beef prices however, continue to decline, with the Choice cutout finishing the week at just under $140 per hundredweight. That’s down just 1 percent from the prior week, but a whopping 11.7 percent drop from one year earlier.
Some of the pressure on beef prices is tied to an unusually steep decline in the value of beef trimmings used for ground beef. An increase in dairy cows going to slaughter, and speculation that more are on the way, probably accounts for at least some of that loss in trimmings value. The Texas Cattle Feeders Association notes that on May 20, Cooperatives Working Together announced that the first of 103,000 dairy cows would go to slaughter within 15 days. Since then, TCFA reports, 90 percent lean trimmings have declined $8.71 per hundredweight from $150.44 to $141.73. During the same period, 50 percent lean trimmings lost even more, declining $11.09 per hundredweight from $80.15 to $69.06.
That sharp decline in the value of 50 percent trimmings is surprising – partly, as TCFA notes, because on average, “50s” tend to gain a couple dollars in value during that timeframe. Also, if dairy-cow slaughter was the only cause, we should be seeing a proportionately greater decline in the 90 percent lean trim, which is produced mostly from cow beef.
In the futures market last week, the live-cattle contracts gained a little ground with June, August and October each moving up about a dollar. If beef prices could turn around, we could see some strength returning to the live-cattle market over the coming weeks.