Trends: Rib and Loin Underpin Higher Boxed Beef Cutout

The comprehensive cutout is 3% ahead of a year ago in the month of January, averaging $213.21 per cwt. The end of the holiday season should have brought about seasonally higher chuck and round primal values, but in the first four weeks of the year, chuck, round, and flank primal values have been the only cuts lagging.

Primal rib values are up 9% in January compared to the prior year. This is the 6th consecutive month the comprehensive primal rib value has been higher than the same month in the previous year. The gains have not been small either, the smallest gain was a 5% increase in August. Primal loin values also had positive 3rd and 4th quarters in 2018 and have maintained that strength heading into 2019. Primal loin values are up 4% year-over-year. This is the 6th month of gains ranging from up 2% to up 7%. These primals are the two highest valued of the beef carcass and combined represent about a third of the carcass yield.

Brisket and short plate primal values also had a strong start to 2019 and are up 10% and 14%, respectively in the month of January. Increases in the short plate were linked to higher export demand in 2018. January’s positive increase could point to a bright start for 2019 export growth.

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Flanks and rounds are down 2%, while chuck values are even with a year ago for the month of January. This lag in meat cuts that typically carry the quarter could actually be a positive sign of consumers staying with higher priced meat cuts after the holiday season.

Fed cattle futures rallied April and Feb contracts during the month of January. The trend in the cutout is providing some support for that. Strong beef demand in 2018 looks to be continuing into the early part of 2019, which will help cattle prices, but LMIC estimates prices will still be below a year ago in the first quarter.

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