Middle Meats Still Dominate but Ends Add Kick

Fed-cattle prices averaged $95.66 the week of Oct. 6, which, of course, set another all-time record.  Compared to the same week a year ago, fed-cattle prices are slightly more than $30 per cwt. higher and compared to the third week in July (the summer low just 12 weeks ago), prices are $20 per cwt. higher. 

On the beef side of the equation, the light-Choice cutout closed the week at $168.08 compared to $109.38 a year ago and $128.40 in mid-July.

It’s interesting to break the cutout components down and analyze where the added value is coming from.  Compared to the same week a year ago, the bulk of the gain in fed-cattle can be explained by higher rib and loin values.  The loin accounts for nearly $10 of the $30 increase in fed-cattle prices while the rib accounts for about $6.50. 

The chuck and round account for about $5 each with the balance attributed to the brisket, plate and flank.  Since mid-July, most of the cattle price increase can also be equated to higher loin and rib values. 

However, the round has accounted for an increasing percentage of the overall gain.  Of the $20 improvement in fed-cattle prices, $6 can be explained by the loin, $6 by the round, $4.50 by the rib and just $3 by the chuck.

This analysis once again illustrates the importance of middle meat values to the overall value of the carcass.  These are also very important trends to watch during the next several weeks and months as they may shed some insight into beef market conditions.  The relationship between the cutout and fed-cattle is always a tight one and they nearly always trend the same direction. 

In order for the cutout to continue to move higher, the rib and loin will likely need to continue to improve.  Any lost momentum in either the rib or loin may suggest that the current market run is nearing completion.