US fed beef prices continue upswing

It has been a volatile week, with US fed beef and live cattle prices strengthening for somewhat unclear reasons.

Ground beef business and chicken wholesale trade stayed strong. Gross profit margins of fed beef packers and feedlots too continued to be good. Pork trade lost some ground, under pressure from heavy kills for past few days and amid some of the lowest retail ham prices in a long time.

Carcass cut-out values for fed beef rose 8-9 cents/lb since last Wednesday (Mar 17), with Choice-grade quoted at 162.6c/lb, up 9.0c from week ago, and up 23c since mid February. Meanwhile, Select-grade is quoted 160.3c, up 7.9c from a week ago, with the spread below Choice-grade still narrow at 2.2c/lb. This big upswing was exacerbated by a very low fed cattle kill last Friday (Mar 19) – down to 81,000 head, from normal levels near 100,000 head. Live cattle futures contract prices stayed much lower - 93c for June and October, and down near 90c for August contracts.

Some analysts point out that up to March 19, US beef production showed significant declines from year ago of 13% in Select-grade tonnage and minus 4% in Choice-grade tonnage, while "no-roll" tonnage rose 7%. This reflected poorer carcass quality (and lower carcass weights), due to harsh winter weather, creating tighter supplies of high quality beef up till now.

Other analysts said the sudden burst of nice spring sunshine in populous Eastern US may be prompting many people to relax and think of outdoor grilling again, after recent snow and severe storms. Hence demand is reviving for the higher-value middle beef steak cuts (rib & loin) that had fallen so low in price last year. It is these cuts that are mainly pushing up the whole beef complex right now, though there has also been stronger beef export trade for some round cuts and short ribs.

Whatever the reasons, producers are hoping that cattle prices stay up, even if this might affect export trade momentum.