Story Behind the Beef Cutout
Center Cattle Report
various cuts making up the composite box price tells a story that frequently
is missed when reviewing the daily fluctuations. The choice cutout may
be up or down for the day but important to a more complete understanding
of beef demand is an examination of the various cuts and the change in
each and the reasons for the change in price. These changes reveal a meaningful
profile of beef demand that tells more than the individual price changes.
When is the last time you took the time to examine the changing trends
revealed in the price relationships of the different primal cuts?
a manner that is similar to the live trade, much of the daily and weekly
pricing of beef is according to a formula derived from reports of spot
prices reported by USDA. It is convenient for both retailers and beef processors
to know they have a large share of their weekly production headed out the
door at prices that are not negotiated but fixed for the week. This provides
some stability to pricing and prevents loggerjams of unsold product at
the beef plant.
by many who are closest to the market are the sometimes revealing story
of changes in consumer, food service, and export demand for beef that set
the stage for prices for live cattle months out in front of us. These changes
might mean the addition of a new export market such as China with differing
taste in beef cuts thereby shaking up the balance of the composite cutout.
Or changes might reflect a lost export market with heavy purchases of rib
recently announced plans to discontinue the purchase of frozen hamburger
meat. This change signaled a heavier reliance on domestic fresh hamburger
meat and this change impacted the imports of frozen beef from our foreign
beef prices vary in large price movements during the course of the year.
This changes are not minor fluctuations without meaning. Instead they often
disclose important changes in production and useage that will determine
more accurate price forecasts if read properly. A 3% increase in the choice
grade translates into more fat trim available and the need for more chucks
or rounds to grind in order to mix with increasing fat tonnage.
high dollar cuts such as loins and ribs fluctuate with the prosperity of
the consumers. Higher wages and more jobs means larger purchases of more
expensive cuts of beef. Retailers pick up on these trends in real time
and changes in consumer preferences can create important clues for consideration
by beef producers in the live sector.
the vast data sets available to the beef industry, much more analysis needs
to occur at the primal cut level to allow the various sectors of the beef
industry the time to respond to ever changing trends in beef demand. Beef
demand is dynamic rather than static. The reports detailing changes in
price need to change every year as new views of the market emerge and new
interpretations of the data allow us to adapt to new demand changes for
the beef products.