Beef Cutout Prices: Widely Reported, Yet Wildly Misunderstood

Frustration and anger were common themes in cattle country in the weeks after a fire at Tyson’s Finney County, Kan., packing facility. Much of that frustration centered around the fact that while fed cattle prices plunged lower, Choice boxed beef cutout values soared higher.

The combination of lower cash cattle prices and higher beef cutout values produced a windfall for beef packers — their estimated profit margins were $191 per head the week before the fire but jumped to $450 per head by early September. Coupled with feedyard losses estimated at $203 per head, the spread between feedyard and packer margins reached a whopping $618 per the second week in September.

That shocking profit spread fueled the anger and deepening rift between packers and feeders. At a cattlemen’s rally in Omaha Oct. 2, organized by groups who are seeking government intervention to “restore fair cattle markets,” speakers noted producers should be rightly outraged at packers’ low-ball bids while “they are charging more for boxed beef going out the back door.”

Such statements were made by those who had their prices right, but their facts wrong. That’s because boxed beef prices are reported daily by USDA’s Agricultural Marketing Service, widely disseminated by media and market services, yet sometimes wildly misunderstood by many cattlemen.

“Markets typically provide strong price responses to a shock such as the Tyson fire in order to initiate actions that repair the market disruption,” says Derrell Peel, livestock marketing specialist at Oklahoma State University.

In other words, we should expect market volatility after such an event that causes uncertainty. Yet, it’s important to understand what spurred beef cutout prices in the fire’s aftermath.

Click here for page 2.



Latest News

CAB Insider: Carcass Value Shifts, a Sign of the Times

Jan. fed cattle prices are normally choppy and we’re seeing that pattern in 2021. A primary difference, compared to 2020, is that last week’s average price is $14/cwt. lower, the same discount as the 5-year average.

18 min ago
Black Ink: Valued Partners

Partnerships aren’t always about a 50/50 business arrangement or who gets what tasks, sometimes they’re simply about having a vested interest in somebody else’s success.

12 min ago
One former Secretary of Agriculture thinks a Biden Administration and USDA will focus more on crafting a farm bill that includes a focus on conservation.
Why a Biden Administration May Not Buy into the Green New Deal

As President Joe Biden took office Wednesday, one former Secretary of Agriculture thinks a Biden Administration and USDA will focus more on helping craft a farm bill that focuses on conservation.

2 hours ago
As wild pigs continue to expand out of control in Canada, the risk of wild pigs moving into the U.S. is very real. This is especially true for North Dakota and Montana, but given how mobile feral swine are, the risks are far beyond that, says Ryan Brook of the University of Saskatchewan. 
Canada Fights Back Against Out-of-Control Wild Pig Population

Wild pig populations in Canada continue to expand rapidly and are completely out of control in Saskatchewan, Manitoba and Alberta. A new tool may help control this invasive species. Here's why you should take note.

1 hour ago
Tyson Settles Anti-trust Case For $221.5 Million

Tyson Foods has agreed to pay a settlement of $221.5 million in the broiler chicken antitrust civil price-fixing lawsuit, according to filings Tuesday in federal court in Chicago.

40 min ago
Three Keys to Quality Colostrum for Beef Calves

Calves are wholly dependent on colostrum from their mothers and the instant a calf is born, a clock begins ticking on its colostrum intake that can have lasting effects on its health and productivity

12 min ago