Beef Trim and Cheese Update 10/11

A couple of milestones in the beef complex occurred this week. We’ll start with 90% lean trim breaking the $2.00 / LB barrier on Tuesday and 85% trim breaking the $1.70 / LB barrier on Wednesday. It looks like ground beef demand has started to plateau which could be spilling into lack of need for trim. Buyers have shown little interest the last few weeks, seen in overall pounds traded, but when trim dropped this week just shy of double the amount of lean trim was traded compared to the previous two weeks. Its looks like manufacturers are taking advantage of this pricing to load up freezers. The trend is steady down for lean trim prices right now and flat for fatty trim. China, however, is buying more US beef than ever before. Which was a contributing factor in what caused the record high trim prices last Fall. We wonder if these low trim prices will catch international attention, especially later on the year, ahead of Chinese New Year. On top of that, China buys most of its beef from South America, but there are concerns about dry weather in Brazil affecting that countries grain crop which could then affect grain availability, price and then price of a finished animal. We are experiencing domestic surges in soy but we are very well priced against other countries. We have a trade deal in place with China but they have said before they will buy where the price is best. Right now it seems South America is their preferred partner but if the US becomes the globally competitive, will China take on more US product?

In boxed beef, Ribeye prices are making a march toward $10 /LB as expected. We've seen Ribeyes priced pretty fairly since they came off the Pandemic Highs in May/June. Now that were within 60 days of Thanksgiving, foodservice and retail channels are initiating their holiday buy-in programs. Were seeing the Ribeye cutout begin the holiday buying season at a lower price than last year but some indicators show demand is actually stronger than last year. We seen really solid numbers on beef exports to Taiwan and Korea for whole muscle cuts. While the USDA report doesn’t denote Ribeye specifically, we do know its popular cut in those countries and expect them to take inventory ahead of the holidays. With all this support for beef sales $10/lb might be the base price this holiday season for Ribeyes, not the peak price.

The loin cutout saw decline across the board this week with Strips and Tenders finally showing signs of post summer weakness. Were pretty much dead even on Choice Top Butt prices compared to last year. Select is trending higher this year over year, as it has been most of 2020. We probably wont see a huge Choice/Select spread anymore. The Foodservice sector is expecting good sales this holiday season. Cash Cattle prices and Futures are generally trending up. Packer margins are pretty strong. From a helicopter view it looks like the beef industry is in a fairly decent place right now. For 2021 were probably looking at slightly higher overall pricing. The contributing factors to continued strength in beef will be lower grain harvest this year and increased pricing for soy meal which will raise the cost of marketable cattle later in the year and any additional support from export competition.

Look out for cheese, we're now being told what were good supplies are now not enough. Cheese output slowed in August after a pretty decent July. Government purchases are competing with export sales. Retail purchases are competing with record pizza restaurant sales. Milk inventory is increasing but so are fluid milk sales so fluid dairy is competing with further processed for raw material, this was not the case 3 weeks ago. The dairy industry is morphing on a weekly basis these days. Whatever happens this week wont necessarily recur next. Butter is cheap though.

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