Beef rallies on stronger demand as “pink slime” controversy fades

A rally in boxed beef prices of nearly $7 per hundredweight early this week lends support to the idea the media-led controversy over pink slime is subsiding. Choice boxed beef prices were quoted at $185.38 on Wednesday, $6.87 higher than Friday’s price. The Select cutout was quoted at $183.50, an increase of $6.17 over Friday’s price.

Early-week feeder cattle auctions are called steady to $4 per hundredweight higher. The grass-buying run is mostly over for the season, but tightening numbers of feeder cattle are providing ample support to the market.

Tthe fed cattle trade offered little in terms of a market gauge, but ideas are that prices may find a late-week rally. Through Wednesday the trade was light to moderate, with top prices in the $122 to $123.50 per hundredweight range. Analysts say feedyards are asking $125 per hundredweight. Packers are thought to need cattle as retail inventories are low. Last week saw one of the smallest non-holiday slaughter numbers over the past year.

Leading into the peak grilling season, beef demand has been soft, fueled in part by the media firestorm over lean fine-textured beef, often referred to as pink slime by the national media. Ground beef sales, including trimmings, fell 11 percent to 37.7 million pounds during March. That’s the smallest amount of ground beef sold during March for 10 years. USDA data shows that wholesale Choice beef dropped 7.8 percent last month, the most since October 2008.

The Sterling Beef Profit Tracker shows packers have lost money on every animal processed since September of last year. This week’s calculations by John Nalivka, Sterling Marketing president, show packers with an average per head loss of $106.57.

Glynn Tonsor, assistant professor in agricultural economics at Kansas State University, told Bloomberg News this week that beef packer margins are likely to stay negative at least through September because the industry’s problems have been “magnified” by the decline in the use of lean fine-textured beef. Lower LFTB use will increase costs as processors switch to more expensive cuts for ground beef, he said.

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