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CME: Cull Cow Markets Affected by Australian Imports

17 November 2015

US - Taking a look at the cull cow market, there has been some significant price changes in recent months.

We have not seen quite the amount of volatility as the heifer/steer market, however the Cutter Cow cutout and wholesale boneless beef 90 per cent lean prices have experienced a hard downturn.

The price change began around the end of September, mostly due to the downturn in the beef complex filtering through to all aspects of the cattle and beef industry.

It did not help that this was the same timeframe when seasonal cull cow slaughter ramps up, as producers make production decisions prior to feeding cows hay over the winter months.

Total cow slaughter, reported weekly by USDA-AMS, is comprised of dairy cows and beef cows. Beef cows make up about 40 per cent of total cow slaughter. Recently, dairy cow slaughter has been tracking consistently above year ago and beef cow slaughter has been below year ago, until Labor Day where beef cow slaughter has been at or above year ago numbers through most current data.

Looking at the change in slaughter cow prices in the Southern Plains, they are currently tracking 35 per cent below year ago values and the lowest since November of 2013. Through the third quarter however, total cow slaughter was 5 per cent below 2014.

The Cutter Cow cutout data, also reported by USDA-AMS, depicts a very similar picture to the slaughter cow prices in the top graph. Cutter Cow cutout value ended last week at $176.12 per cwt., $3.25 below the prior week and the lowest since February of 2014.

Most meat product from cull cows gets turned into 90 per cent lean beef, used in ground beef and hamburger mixes to achieve, for example, a 75 per cent lean/15 per cent fat ratio in a burger.

The 90 per cent lean beef is also the majority type of beef we import from Australia, and in increasingly large quantities this year. Looking at 90 per cent lean beef prices, those also fell around the end of September and very much resemble the top graph’s price movement.

The beginning of July, USDA-AMS reported wholesale 90 per cent lean boneless beef at $2.94 per pound. Data from the first week of November had that price at $2.20 per pound.

We do not see a change in producer mentality with regards to national beef cattle herd growth, we expect herd growth to continue. One fundamental we see as changing is a reversion back to more normal cow culling rates in the beef cattle industry.

The factors affecting the cull cow and Cutter Cow cutout market stem largely from the fall out in the beef complex, some impressive import volumes of Australian beef this year, and an increased volume of boneless beef that is currently held in cold storage.

Moving on to a weekly summary wrap up, estimated beef production for last week was 471.9 million pounds, just about even with year ago numbers.

Prices continued to decline in the cattle and beef complex this past week. Feeder prices in Oklahoma City were down $4-$6 per cwt. The beef cutout value averaged $213.79 per cwt. last week, $4.75 below the prior week. That was the largest one week drop since the beginning of October.

Estimated pork production for last week was at 506.9 million pounds, if this is realised it will be the largest weekly pork production ever. Hog prices continued to struggle amidst large production numbers.

Broiler production was up 5 per cent for the week compared to last year, with the production increase continuing to be based on larger bird weights. Turkey production took a hit last week, at 8 per cent below year ago numbers, and stagnant week-to-week at a time which would normally be the seasonal production high for the industry.


Daily Livestock Report - Copyright © 2008 CME. All rights reserved.


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