Did you know… 2015’s great, late “ride”
By: Larry Corah, for Certified Angus Beef LLC
We all enter 2016 with feelings, maybe apprehension, about what a new year might bring. Amid toasts to good health, others harbor more dramatic plans, bold resolutions or simple reflections on what happened and how the new year might differ.
Since I can never keep a resolution, I’ll just reflect as a lifelong student of the beef industry on two big impressions still vivid in the afterglow.
First, I did not see the cowherd expanding as rapidly as it did, probably underestimating the impact of better forage conditions. Secondly, the magnitude of price volatility surprised me as a reach for $160/cwt. fed-cattle last summer led to the cliff dive to $117, only to bounce back in an amazing rally to end the year.
Most of us started 2015 with great expectations, more or less realized until summer apprehensions—and then that 25% plunge in fed cattle prices from mid-August to mid-December ($157 to $117).
Mired in disappointment and only somewhat cheered by the rebound, let’s not forget the brighter silver lining: consumer demand for beef remains strong at the retail and restaurant level. The desire to eat beef among the emerging generation of consumers often called Millennials bodes well for this industry long term.
So let’s burrow deeper in to this late-year price swing and share some things you likely DID NOT KNOW about what happened and why.
Detailed information in the Urner Barry Report (urnerbarry.com) shows how that swing affected consumers and their daily buying decisions.
Comparing mid-August 2015 to 2014, you might be surprised to see fed cattle nearly the same, $157 being just $3 below the 2014 mid-August price. At the same time, boxed beef prices showed middle meats fully steady to $1 higher than 2014, but end meats and grinds were as much as 10% lower.
Now let’s look at December to December, when fed cattle in 2014 were $157/cwt., compared to $117 for the low in 2015. That cattle price was down a familiar 25% compared to a year earlier. December 2015 middle-meat prices were down from 2014, but only about half as much as cattle, with a 10% to 12% decline. On the other hand, prices for end meats and ground beef declined 30% to 35%.
That was comparing the two years. Now look at the price swing in boxed beef from August to December in just 2015 (See table). Keeping in mind the plummet in fed cattle prices, we can see the percentage decline in boxed beef was even greater, for the most part. A big exception was the price of ribs, considerably higher and likely due to strong demand for prime rib holiday meals.
A couple more reflections glimmer in the comparison. Despite the big drop in cattle prices, the boxed beef spread for both Choice-Select and CAB-Choice actually increased. Some of that is the normal seasonal trend, but considering the abnormal cattle market, it reassures us that the consumer is willing to pay more for quality.
Another important trend that emerged last fall when beef prices fell substantially is the big increase in ads featuring beef in newspapers across the country, suggesting retailers recognize the important position beef occupies as the protein of choice in their meat case. As we move into 2016, continued featuring will be a key to cattle prices going forward.
Well, enough reflecting, except to say we do hope your 2016 will be especially kind.
|TABLE 1: BEEF’S GREAT “FALL” IN 2015|
|13-Aug-15||17-Dec-15||% Change over 4 Months|
|Live Cattle Price||$1.53||$1.17||-23.50%|
|Choice – Select Spread||$7.20||$11.40||58.30%|
|CAB – Select Spread||$15.00||$18.00||20.00%|
|Carcass Value||Carcass Value|
|Primal Boxed Beef Value|
|Ribeye (Lip-on), $||7.95||7.47||6.84||8.89||8.49||7.32||118||128||70|
|Striploin (OXI), $||6.85||6.2||5.63||5.7||5.23||4.53||-16.7||-15.6||-25.2|
|Top Sirloin, $||4.61||4.46||3.85||3.15||3||2.55||-31.6||-26||-36.4|
|Chuck eye Roll, $||3.29||3.21||3.21||2.81||2.72||2.72||-14.5||-15.2||-15.2|
|Inside Round, $||3.21||3.1||3.1||2.03||1.96||1.96||-36.7||-36.7||-36.7|
|Ground Chuck, $||2.59||2.48||2.48||1.83||1.73||1.73||-29.3||-30.2||-30.2|