Remarkable

By Cassie Fish, http://cassandrafish.com

The first quarter of the year, especially late January and February has historically been one of the weakest beef demand periods of the year. Not only that, Q1 has been the poorest packer margins of the year, with February consistently the worst showing. But just as 2020 was full of outliers, thus far 2021is not to be outdone when it comes to beef market. Boxed beef values are soaring to levels saw in 2014 and 2015 but this time, it is doing so on record beef production. Packer margins are surging, pushing back out over $300 per head last week which is as unheard for January as it is unexpected.

The record beef production the industry churning out fueled by huge slaughters exceeding 650k per week and record carcass weights is simply ‘spoken for’ from a combination of formula sales, forward contract sales, export sales and brisk spot demand. The choice rib is the stand-out of the entire carcass, soaring to record levels for early February, quoted yesterday afternoon by the USDA at $378 per cwt. The prior record holder for highest rib values in early February was 2019 at $345. The rib is $43 higher than one year ago.

 The chuck primal has been no slouch, quoted yesterday at $205, the third highest behind 2015 and 2014 when there was a severe ground beef shortage that was resulting the grinding of some round and chuck sub-primals.

Overall the choice cutout value is $235, compared to the weekly average in 2015 of $241 and 2014 of $231. Those two years saw historically low beef production and the rally was a forced affair that was supply driven. In 2021, the rally is demand driven, and though it is early, appears to be as historic.

The relationship of cash fed cattle prices to boxed beef prices was skewed in 2020 due to the production shut down and resulting back log. Still fed cattle prices suffer relative to cutout values. Last week’s cash price was the lowest since 2011 a stark and utter contrast to the bonanza in wholesale beef. The backlog is no longer and the significant placements against Q1 are being marketed at a fast rate, the fed kill in January averaging above 504k head, the largest since January 2010, though steer carcasses then averaged 838 pounds. Cash fed cattle prices will gain on the cutout going forward as a trend over the next several weeks.

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