Wholesale Beef Prices Spike Higher Following Winter's Wrath

.
.
(USDA)

Wholesale beef prices have performed exceptionally well over the past few weeks, and the Choice beef cutout has spiked higher the past week. On Tuesday the Choice boxed beef cutout printed at $280.04 per cwt., or $8.09 per cwt. higher than the previous trading day.

At least some of the price rally is due to disruption from the recent extreme winter weather.

“Extreme cold negatively impacts cattle in feedlots as the animals burn more energy to survive,” says Steiner Consulting Group senior economist Altin Kalo. “We have yet to see the full effect of this and it will be more an issue in January as extreme cold weather results in lower gains and delays marketings.

Feedyards are more current than they were a year ago at this time when the choice cutout was trading at roughly $260 per cwt. USDA’s Dec. 1 Cattle on Feed report counted the supply of cattle with 120-plus days on feed was 76,000 head smaller than in 2021 and the smallest number of that weight group since 2018. Winter weather can quickly shrink the number of those cattle that are market-ready.

While that will affect supplies in coming weeks, Kalo says it has also created other impacts.

“In the very near term the storm has significantly affected the movement of cattle from feedlots to processing plants, plants’ ability to bring workers in, and the movement of beef from processing plants from the middle of the country to metropolitan areas,” he says.

Fed cattle slaughter the week of Dec. 5 was near full capacity and total fed slaughter that week was 497,000 head. The following week saw fed slaughter decline 16,000 head and then another 69,000 head the following week, resulting in fed slaughter the week of Dec. 19 down 15% that two weeks prior.

“If the last two years have shown us anything it is that the beef market can be very inelastic in the near term, with retailers and foodservice operators needing to get supply for the meat case and run further processing plants,” Kalo says. “Normally we see the price of bone‐in and boneless ribeyes decline sharply in December once Christmas orders have been filled. That was not the case this year because packers simply did not have the meat to fill those last-minute orders, causing buyers to scramble to get replacement product in a very thin spot market.

Kalo noted the rib primal was $548 per cwt. early this week, the highest for the year even though Christmas demand was done.

“Why are people paying that kind of price? Because they are short and when you need to fill orders in a market where supply is thin you end up paying whatever it takes to outbid the other guy. It may not last, but for now that’s the price to pay for the disruption,” Kalo says.

An additional influence on wholesale beef prices is a large forward sales commitment packers made in early December. Kalo said that was for product delivering 22 to 60 days out, or retail features for January and February.

Some of that product may already be scheduled, limiting spot supply. Beef sales 22‐60 days out in the three weeks ending December 16 were a total of 2,953 loads, higher than the previous year and 38% higher than in the same three week stretch in 2019 (pre‐COVID).

“So here we are with likely less supply of market ready cattle for January in feedlots, more weather stressed cattle and more beef booked for delivery,” Kalo says. “Spot buyers/traders woke up to this reality during the Christmas week storms and may feel the effects of tight supplies well into January.”

 

Latest News

Biden Administration Restores Wildlife Protections
Biden Administration Restores Wildlife Protections

The U.S. Fish and Wildlife Service plans to reinstate rules protecting endangered plants and animals, action that would reverse changes made during the Trump Administration that weakened the Endangered Species Act.

Across Breed EPD Adjustment Factors
Across Breed EPD Adjustment Factors

EPDs from multiple breeds can be compared by adding/subtracting the appropriate adjustment factors to the EPDs resulting from the most recent genetic evaluations for each of 18 breeds.

APHIS Now Thinks Wild Birds Are to Blame for Highly Pathogenic Avian Influenza's Arrival on Four U.S. Dairies
APHIS Now Thinks Wild Birds Are to Blame for Highly Pathogenic Avian Influenza's Arrival on Four U.S. Dairies

The livestock industry continues to grapple with the first confirmed cases of HPAI in cattle, while federal and state agencies continue to assure consumers there's no concern about the safety of the U.S. milk supply.

Skills Survey Reveals U.S. Agriculture & Food Industry Workforce Needs and Gaps
Skills Survey Reveals U.S. Agriculture & Food Industry Workforce Needs and Gaps

U.S. employers report challenges in finding suitable job candidates with work-ready skills to fill open roles in ag. The AgCareers.com U.S. Skills Survey offers insights, data and trends to address skill development.

USDA Authorizes CRP Graze and Hay Donations to Wildfire Victims
USDA Authorizes CRP Graze and Hay Donations to Wildfire Victims

Conservation Reserve Program (CRP) participants can donate emergency grazing authority to ranchers in Nebraska, Oklahoma and Texas impacted by recent wildfires.

New Guide Helps Producers Maximize Values of Cull Cows
New Guide Helps Producers Maximize Values of Cull Cows

A new resource developed by the National Cattlemen’s Beef Association and CattleFax helps cattle producers maximize profitability from their culling decisions.