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Vol. 11, No. 8 / January 11, 2013
Market Comments 000 HEAD US STEER & HEIFER SLAUGHTER, OCT - MAR
PRELIMINARY DATA BASED ON DAILY SLAUGHTER ESTIMATES - 7 DAY RUNNING TOTAL
600.0
OCT 10 - MAR 11 OCT 11 - MAR 12 OCT 12 - MAR 13
Steer and heifer slaughter has bounced back after the
holidays and this has put some pressure on spot wholesale beef 550.0
prices. While beef prices are higher than a year ago, they will
need to appreciate further considering the live cattle board prices
for February ($131.22) and April ($134.77). Indeed, the board 500.0
has corrected significantly in the last two weeks, with the April
contract down by more than 300 points compared to late Decem-
450.0
ber levels. As we have noted before, with steak cuts seasonally
lower, the challenge will be to put more dollars on cuts that nor-
mally see an improvement in demand during cold weather, such 400.0 Jan - Mar 2012 Est.
as rounds and chucks. So far that has been difficult, especially
Thanksgiving Christmas
considering how much the value of the round and chuck primals
needs to advance in order to sync up with the price of cattle being 350.0
offered. Indeed, the performance of middle meats has been much OCT NOV DEC JAN FEB MAR
better than expected. Without that, the overall cutout value
would likely be much smaller. Last night, the choice beef cutout US WEEKLY EXPORTS OF BEEF MUSCLE CUTS - TOTAL
closed at $193.80/cwt, about $7/cwt or 3.7% higher than a year 28,500
Metric Ton, Shipped Weight, FAS/USDA
ago. However, the year over year increase in the value of the loin
primal contributed about $4.6 to the overall increase while the rib
primal was up $1.7. The chuck and round primal are higher but 23,500
only about 2% from last year while items such brisket, short place
and flank were all lower than a year ago.
18,500
One reason for the softer tone in items such as short
plates is that export business so far remains fragile. While some
markets continue to grow, exports to traditional Asian destina- 13,500
tions, such as S. Korea and Japan, have not been as strong as
expected. Since December 1, weekly beef shipments to S. Korea
8,500
have averaged about 8% below year ago while exports to Japan
have declined by 17%. The Japanese market has been very soft, 2008-2012 2012 2013
with weekly exports since October down 13%. Shipping beef to 3,500
Japan is challenging, with the 21 month requirement limiting the Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
supply and inflating prices. Also, the volatile exchange rates
have made trade extremely volatile. The value of the US dollar
Asian business. Since November, weekly shipments to Mexico
vs. the Japanese yen has gained ground and this has added to the
have averaged 16% above year ago while weekly exports to Cana-
price that Japanese buyers have to pay for US beef. In early Oc-
da have been 18% higher than last year. Egypt and Hong Kong
tober, 100 Japanese Yen would buy you about $1.28 worth of US
continue to buy more beef from the US but those markets are
beef. Today, that same 100 Yen buys you $1.13 of US beef, a 12%
vulnerable to competition from Brazil.
decline in purchasing power. In the meantime, cattle prices have
jumped from about $123 in early October to about $128-129 to- Bottom line: The expectation is for US cattle and beef prices to
day, a 5% increase. You add these together, and this does not be higher in the coming months. The futures board shows that
bode well for exports to Japan. Markets like Russia, which ap- and analyst forecasts all have penciled in beef price inflation.
peared to show promise for growth, also are down as much as 46% However, that is predicated on the expectation that beef supplies
since November. Despite these challenges, some other markets, will decline sharply (watch those weights) and that exports will
particularly in North America, have helped offset the decline in continue to pull more beef out of the US (watch those currencies).
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