Byproduct Value Drops for First Time in ’04

After holding up rather well post-Dec. 23, 2003, when important foreign markets were closed to U.S. beef products, the beef byproduct value declined significantly in August — representing the first time in 2004 the byproduct value was below the 1998-2002 five-year average.

The byproduct value, also referred to as the drop, is the value of 23 non-meat items — nine major and 14 minor — that are traded in the foreign market. The hide represents the largest share of the total byproduct value, accounting for approximately two-thirds of the total value during the last five years, followed by the tongue, inedible tallow and meat scraps.

Often ignored, the byproduct value can contribute an additional $7 to $10 per cwt. on a live weight basis to slaughter steer and heifer values. The byproduct value is primarily driven by international demand and supply conditions since many byproduct items are exported to markets where they have higher value.

Daily and weekly prices for the major byproduct items are reported by the Agricultural Marketing Service (AMS). AMS also calculates an estimated byproduct value on a live animal per hundredweight basis.

The byproduct value during the first half of this year was $93.85 per 1,000 pounds of steer — about 3 percent less than the same period in 2003. This slight decline was primarily due to a few major items losing value since many byproduct items posted significant year-to-year gains. The continued strength of a few items has supported the overall beef byproduct value.

In July, the byproduct value averaged $97.16 per 1,000 pounds of steer, about 50 cents more than last year. This was the second highest byproduct value reported so far in 2003, just behind January’s $97.19 per 1,000 pounds.

Aside from the tongue, all the major byproduct items posted a year-to-year value increase in July. The heart was up 60 percent, followed by meat scraps (up about 49 percent) and tripe (up 33 percent). The tongue has lost a considerable amount of value this year, averaging about 52 percent less than in 2003. Nonetheless, strong values for the remaining byproduct items have compensated for losses in tongue values this year.

On a monthly basis, the byproduct value climbed 4 percent or $3.75 per 1,000 pounds of steer from June to July but then lost about $11 per 1,000 pounds of steer (or 10 percent) from July to August. During that time, the byproduct experienced weakness in the values for meat scraps (down 33 percent), liver (down 26 percent) and edible and inedible tallow (down 12 percent and 15 percent, respectively). In a more typical year, the byproduct value does not change much during the summer months, but given the volatility of the beef industry, a number of factors could have contributed to the monthly decline.

The August byproduct value averaged $86.15 per 1,000 pounds of steer, about 14 percent (or $14.50 per 1,000 pounds of steer) less than in 2003. The major items posting year-to-year increases during August were tripe (up 25 percent), heart (up 13 percent), cheeks (up 10 percent) and tallow (both edible and inedible, up about 6 percent from 2003). The liver continued to decline in value, down nearly $5 per 1,000 pounds of steer or 56 percent compared to August last year.

During the first six months of this year, the hide averaged 30 cents less per hide than it did during the same time in 2003. In July, the hide averaged $57.80 per hide, a $1.05 per hide increase from last year. The highest monthly value for the hide so far this year was posted in August, when the hide strengthened to $58.71 per hide, 2.5 percent or $1.42 per hide more than a year ago. According to the weekly data for September, though, the hide has started to moderately decline.

Source:  Livestock Marketing Information Center