1. Vol. 10, No. 212 / November 1, 2012
Market Comments Seasonal Factor & 2012 Price for Choice Beef Cutout
seasonal price
1.10 205.0
Wholesale beef prices pulled back sharply this
factor US$/cwt
week after flirting with near all time record highs the week 1.08 201.0
prior. Market participants appear to be split in their views as to 2012 price
1.06 197.0
the reason for the recent break. Some argue that the pullback is
largely a by-product of the disruptions caused by Hurricane Sandy, 1.04 193.0
which caused widespread transportation backups and also forced
1.02 189.0
foodservice operators, food retailers and processors to delay deliv-
eries due to the storm. Indeed, the choice beef cutout was flying 1.00 185.0
high before the storm, closing at $199.4/cwt last Wednesday and 0.98 181.0
Thursday, 6% higher than a year ago. In the last two days the 5‐yr seasonal
cutout game up all the gains made in the week before. On 0.96 177.0
Wednesday afternoon, the choice beef cutout was quoted at $194.8/ 0.94 173.0
cwt, $3.4 lower than the previous day and $4.6/cwt lower than a
week ago. The select beef cutout was quoted at $176.7/cwt, down 0.92 169.0
$1.2/cwt from the previous close and $7.2/cwt lower than a week 0.90 165.0
ago. Also supportive to the rise in beef prices recently has been the Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
notable decline in the number of fed cattle coming to market. So
far, steer and heifer slaughter has followed the path we outlined 000 HEAD US STEER & HEIFER SLAUGHTER, JUL - DEC
back in September (see DLR Sep 12). Steer and heifer slaughter is PRELIMINARY DATA BASED ON DAILY SLAUGHTER ESTIMATES - 7 DAY RUNNING TOTAL
650.0
currently running at a weekly pace of 485,000 head per week,
JUL 10 - DEC 10 JUL 11 - DEC 11 JUL 12 - DEC 12
about 3.5% lower than a year ago. The tighter supplies clearly
have underpinned beef values since August (see chart). 600.0
While some see the break in beef prices recently as relat-
ed to the storm in the East Coast, others remain unconvinced. 550.0
Rather, for them the recent sharp break is another indication that
wholesale beef prices may have gotten somewhat ahead of them- 500.0
selves. Wholesale beef values moved counter-seasonally higher in
September and October. October beef business tends to be some-
what soft as retailers are busy working on their ham and turkey 450.0
features. Normally this time of year will see a hodge-podge of expected fed sltr
for Sep ‐ Nov
features at retail. Cooling weather also adds another dimension to 400.0 4th July
the soft beef demand trends. In addition to the decline in domestic Labor
Day Thanksgiving
demand coming into winter, exports to some key markets normally Christmas
decline around this time of year (Japan, Korea). One beef item 350.0
that has performed well so far is the price of fat beef trimmings. JUL AUG SEP OCT NOV DEC
While still off by more than 43% from last year, the price of fat
beef trimmings is currently hovering near 70 cents per pound. Normally prices for fat trim tend to be weaker in December and
Only a few weeks ago, fat trim was priced some 20 cents lower this could weigh on prices. As the chart above shows, there is a
than current levels. It remains to be seen how long fat beef trim seasonal tendency for choice beef prices to pull back after Janu-
values will be able to provide this kind of support. Normally food- ary 1st. February 2013 live cattle are currently priced at around
service operators are actively looking to book their grinding beef $130/cwt. We would need to see the choice cutout hold around
needs for hamburger patties that will be sold over the holidays. $205/cwt for those kind of cattle prices to hold.
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