1. Vol. 10, No. 241 / December 13, 2012
Market Comments $/cwt
Change of in the Vale of the Choice Beef Primal
December 12, 2012 vs. December 14, 2011
5.00
US cattle prices moved higher this week even as concerns
linger about ability of beef prices to sustain significantly 4.00
higher price points in Q1 of 2013. The gains in cattle prices in
part reflect higher cutout values but also continued appreciation in 3.00
the value of drop credits and generally higher prices paid in export
markets. Those gains do not show up if one looks at just the cutout 2.00
but make up a considerable portion of the profits for packers today.
But the cutout has gained ground as well. The overall choice cut- 1.00
out closed on Wednesday afternoon at $195.78/cwt, up $7.1/cwt
compared to year ago levels. The select cutout closed at $175.30/ ‐
cwt, $3.8/cwt or 2.2% higher than the same period a year ago.
(1.00)
Looking at the gains in the value of the cutout, it is clear that so far Rib Loin Chuck Round Brisket Short Plate Flank
the increase in prices is almost entirely due to higher prices for
middle meats. The value of the choice loin primal, which is a com- 000 HEAD US STEER & HEIFER SLAUGHTER, OCT - MAR
posite value based on the value of the cuts and trim from this pri- 600.0
PRELIMINARY DATA BASED ON DAILY SLAUGHTER ESTIMATES - 7 DAY RUNNING TOTAL
mal, closed on Wednesday at $266.66/cwt, up some $22/cwt or 9% OCT 10 - MAR 11 OCT 11 - MAR 12 OCT 12 - MAR 13
from a year ago. The increase in the value of the choice loin primal
accounted for over 60% of the increase in the value of the cutout 550.0
even as this primal accounts for around 21% of the volume. The rib
primal also was higher, increasing about $13.5/cwt or 4% from a 500.0
year ago and accounting for another 20% of the increase in the cut-
out value.
450.0
So why do we care so much as to what primal is contrib-
uting to the gains in the value of the cutout at a given point? Sea-
sonality is an important component in beef pricing. Going 400.0
Jan ‐ Mar 2012 Est.
into the holidays, demand for steak items tends to improve and this Thanksgiving
helps carry overall carcass values. But once the holidays are be- Christmas
hind us, we will need to see a notable improvement in the value of 350.0
other primals. In the past three years, prices for the rib primal in OCT NOV DEC JAN FEB MAR
Q1 on average decline about 8% compared to Q4 prices. The rib
primal in Q1 of 2012 was actually 13% lower than in Q4 of 2011. record highs, we will need to see a more normal seasonal price
Other primals, tend to increase in value from the previous quarter. appreciation for items other than ribs and loins. Futures are
Last year, those quarterly gains were relatively muted, which has currently pricing cattle for Q1 of 2013 at all time record highs,
some concerned about another repeat this year as well. Indeed, the with Feb live cattle closing at $131.8/cwt and April closing at
chuck and round primals, which tend to carry the carcass in Q1, $135.8/cwt. This would likely require the choice cutout to be
performed rather poorly last year. Consider that in the last three somewhere around $206-$209 level. Lower beef supplies should
years, the chuck primal by Q1 was on average 11% than the preced- be supportive of higher prices but that presupposes a steady
ing quarter. However, last year, the q/q increase was just 2%. In demand curve. Factors such as disposable income growth, un-
the case of the round primal, the q/q average increase was about 7% employment levels and job growth, energy prices and the overall
for the last three years but last year prices rose just 1%. If we have economic environment also will play a role. For now, the steaks
a similar performance this year, needless to say it will be quite dif- and rib roasts are carrying the day as consumers prepare for the
ficult to hit the cattle prices futures are currently indicating. The holidays. A more balanced market is needed for expected record
point of this exercise is that in order for cattle prices to climb to prices to become reality.
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