Sorting out the January cattle and beef market run

Author: Kristy

Derrell Peel, Oklahoma State University Extension  |  Updated: 01/27/2014

It appears that the phenomenal January run of wholesale beef prices may be over. Choice and Select boxed beef prices peaked on Wednesday, January 22 at $240.05/cwt (Choice) and $237.44/cwt. (Select). Choice boxed beef dropped back nearly $3/cwt by Friday with Select dropping just over $1/cwt. This leaves a very narrow Choice-Select spread of $1.98/cwt. This level is close to the seasonal low in the Choice-Select spread but it usually does not occur until March or April.
Several factors are at work in the current wholesale beef market. Clearly supply reductions are a major driving factor. Year to date beef production is down 10 percent from 2013 January levels, with cattle slaughter down 10.6 percent year over year so far this year. This follows a nearly 10 percent drop in beef production the last week of December, 2013, due in part to a fire that idled one major packing plant for much of Christmas week. Another factor is that this market rally has been driven almost entirely by Chuck and Round products rather than middle meats (Rib and Loin). Additionally, the cutter cow cutout is up $10/cwt. from year ago levels; all of which indicates that this rally is driven by mostly by ground beef and processing beef demand. The more than 11 percent drop in cow slaughter in the fourth quarter of 2013 probably played a significant role in setting up the supply reductions that helped drive the January rally. The unusually small Choice-Select spread at this time is due to a combination of increased demand for Select and decreased supply of Select relative to Choice. The percent of cattle grading Choice continues to run well above year ago levels, as it has since Zilmax was removed from the market last fall. READ MORE

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