Beef prices through much of the complex have been taking a beating in recent days and weeks and many people are wondering where the seasonal bottom in prices will firm up.
Live cattle prices already are below the bottom of an expected range put out a few weeks ago by price pundits. For example, RaboResearch analysts said recently that with increasing supply and feedlot placements and seasonally slowing domestic demand, fed-cattle prices should hit summer lows in the range of $110-115 per hundredweight.
As of Monday afternoon, both the August and October board prices were in the $105 range.
At the end of last week, boxed beef was reported down another $5, and beef export sales during the week of August 10 were 22% lower than the previous week and 9.5% below levels the same week last year. This is in relation to previously very strong exports.
Choice cutout values were down to a weekly average of $197.66 per hundredweight in mid-August after climbing to a stronger than expected seasonal peak of $250.86 per hundredweight in mid-June.
Cassie Fish, who blogs for Consolidated Beef Producers, Inc., wrote Monday morning that cash prices have declined by more than 20% and some are now wondering if a 30% decline is in order, possibly pulling prices as low as $100.
Obviously, some of this can be written off as seasonal weakness. On the other hand, there's still good news in beef markets.
Derrell Peel, Oklahoma State University Extension livestock marketing specialist, noted all-fresh retail beef prices were $5.83 per pound in July, up 1 percent year over year. All-fresh beef prices have increased each month this year since January, he said. July Choice beef prices were $6.10 per pound, down from the June level of $6.21 per pound, but fractionally higher than July of 2016.
Further, Peel said, the all-fresh retail beef price increased relative to the broiler composite retail price in July. The current ratio of retail beef to broiler prices is equal to the record level set in July, 2015. The retail beef to pork price ratio is also holding steady at levels near the record during the high prices of 2014 into 2016 and, like the beef to broiler retail price ratio, are at levels well above historical ratios prior to 2014.
Peel also noted the Choice-Select spread has narrowed, though not necessarily more than a seasonal narrowing. He added that the ground beef market has been volatile this year, with 50% lean fed trimmings exhibiting an unusual and pronounced spike in May before returning to year ago levels recently. Lean trimmings (90%) followed year-earlier levels through late April before rising sharply higher year over year for the past several weeks.
The Daily Livestock Report from the Chicago Mercantile Exchange noted the average national feature price for 80-89% lean ground beef last week was $3.45 per pound, which was 3.6% higher than a year ago. It also noted in the last couple of weeks retailer-featured ground beef prices have averaged around $3.50, compared with $3.25 in March, April and May.
Peel thinks wholesale beef product markets are continuing to adjust after the unusual price relationships that emerged during the record high prices from late 2014 through early 2016.
"Many lower value products increased relative to middle meats during this period but are returning to more typical price relationships in 2017," he says.
None of this tells us where the seasonal bottom of this market is, but it suggests there are factors at play we probably don't recognize.
The other thing to watch is the larger economy, which appears to be quite a mixed bag. For example, one report says consumers are about to run out of savings and could cut back more, encouraging a recession. Consumer debt is also reaching record proportions. These appear to be auto loans, credit cards, student loans and other sources. Also, while the stock market is not directly representative of the economy, a downturn can have a negative effect on it because so much of corporation's profits calculations are tied up in stock pricing. With the long and strong run the market has made, more people are starting to worry about a market pullback.