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Beef Packers Going Broke More Slowly
The latest jobs report is encouraging. The U.S. economy added 321,000 jobs in November. More people working is good news for meat demand. The unemployment rate held steady at 5.8 percent.
Gasoline prices have fallen rapidly in recent weeks. That should free-up consumer dollars to spend on food. It's not been a great year for beef packers, but the numbers indicate they are going broke more slowly than during the last three years.
Fed cattle prices were lower this week on modest sales volume. Through Thursday, the 5-area average price for slaughter steers sold on a live weight basis was $166.61/cwt, down $5.35 from last week's average, but up $34.72 from a year ago. The 5 area average dressed price for steers was $263.97/cwt, down $2.44 for the week, but up $54.87 from the same week last year.
Boxed beef prices declined this week. This morning the boxed beef cutout value for choice carcasses was $253.87/cwt, down $3.28 from the previous Friday, but up $51.85 from a year ago. The select carcass cutout is $237.78/cwt, down $8.11 from last week, but up $50.10 from a year ago.
The choice-select price spread this week is $16.10/cwt. That is the largest spread since early November 2013. The wide spread reflects, in part, strong consumer demand for quality beef.
This week’s cattle slaughter totaled 562,000 head, up 13.3 percent from Thanksgiving week, but down 10.7 percent from the same week last year. This was the 40th consecutive week with cattle slaughter below the year-ago level.
Slaughter weights continue to be heavy. The average steer dressed weight for the week ending on November 22 was 901 pounds, down 5 pounds from the week before, but up 22 pounds compared to the same week last year.
Year-to-date cattle slaughter is down 7.4 percent, but year-to-date beef production is down only 6.0 percent because of heavier weights.
Feeder cattle prices at this week's Oklahoma City auction were mixed compared to the week before. This week's prices for medium and large frame #1 steers by weight were: 400-450# $363-$393, 450-500# $313-$329.50, 500-550# $281-$316, 550-600# $268-$290, 600-650# $254-$288, 650-700# $245-$265, 700-750# $235-$252.50, 750-800# $225-$237.75, 800-900# $215-$233.25, and 900-1000# $210-$222/cwt.
The December live cattle futures contract settled at $164.45, down $4.42 for the week. February cattle settled at $164.87/cwt, down $4.35 from the previous Friday. The April contract closed at $164.30/cwt with a loss of $4.70 for the week.
The January feeder cattle contract ended the week at $234.87/cwt, down $3.80 for the week. March feeders closed at $231.22/cwt, up $1.02 compared to last Friday. April feeder cattle ended the week 15 cents higher at $230.92/cwt. ∆
DR. RON PLAIN AND DR. SCOTT BROWN: Agricultural Economists, University of Missouri
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