1. Vol. 10, No. 162 / August 21, 2012
Market Comments $/cwt CHOICE BEEF CUTOUT, USDA, DAILY CLOSE, $/cwt
210.0
Wholesale beef prices have rallied sharply in the last two
200.0 2012
weeks as end users prepare for the Labor Day holiday week-
end and the start of the school year. Some end users also have 190.0
started accumulating beef for the holidays earlier than normal.
The rally into late August is not that unusual for this time of year 180.0 2011
and follows similar patterns in 2010 and 2011. Tighter cattle sup-
plies and buyer anxiety of commodity price inflation have made 170.0
the recent rally even more significant. The choice beef cutout
closed on Monday evening at $193.90/cwt., $6.5/cwt. or 3.5% 160.0
higher than a year ago. The choice cutout has rallied some
$16.2/cwt. or 9.1% since the beginning of August. During the same 150.0
2010
timeframe last year, the choice cutout rallied about 8% only to
140.0
pullback by the first week of September. The select cutout closed
on Monday evening at $185.30/cwt., $2.2/cwt. or 1.2% higher than
130.0
the same time last year. Since the beginning of August, the select Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
cutout has rallied some $14.5/cwt. or 8.5% from a year ago.
The rally in the choice and select cutouts has been driven Cutout Steer
almost entirely by higher middle meat (steak) prices. The rib pri- $/cwt 2011-12 CHOICE BEEF CUTOUT VS. LIVE STEER (5-MKT) PRICES $/cwt
mal value (a composite value of the cuts/trim from the rib) closed 215 136
on Monday evening at $288.80/cwt, $32.8/cwt or 13% higher than a
year ago. The increase in the rib value contributed more than half 205 130
of the overall increase in the cutout. Loin primal value was quoted
Live Steer
at $266.20/cwt, $14.2/cwt or 6% higher than a year ago, contrib- 195 Futures as of 124
uting another 40% or so to the overall cutout. Gains from other Aug 20, 2012
parts of the carcass have been limited or even negative. Chuck 185 118
and round primal values, which were the value leaders the last
two years, are currently trading near year ago levels while the 175 112
short plate is down 8% and flank is down 2%. The value of the
short plate, which accounts for about 7% of the carcass, has been 165 106
negatively affected by lower credits for fat beef trimmings. Indeed,
Choice Cutout (left) Live Steer (right) Cattle Futures
the sharp decline in the price of 50CL beef trim has been a drag for
155 100
the overall carcass. The price of 50CL beef trim is currently trad-
ing about 50% below what it was last year. In previous years, a
good portion of the fat trim from carcass processing was going into
making Lean Finely Textured Beef. With about 75% of the LFTB November, approaching $200/cwt. Live steer futures for the
processing capacity removed following boycotts from retail and balance of the year are below $130/cwt, reflecting expectations
foodservice operations, there is plenty of fat beef trim in the open that the cutout will follow a similar path as last year and hover
market. in the $195-205 range between September through December.
Live steer prices have increased following the recovery in Live steer prices imply significant beef prices inflation in 2013.
wholesale beef values and futures market participants expect the But, for that to happen we will need to see increased contribu-
rally in live steer values to continue. Last year, the choice cutout tion from other parts of the carcass, particularly rounds and
took a brief dip after Labor Day but then continued to rally into chucks.
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