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By-product value and Importance to fat cattle prices

By-product value and Importance to fat cattle prices
Products that add the greatest value to the byproduct value are the hide, tallow, tongue, tripe, oxtail, and cheek meat.

In 2020, the US exported $7.6 billion in beef and variety meat products (down 6% from 2019); variety meat exports to all partners accounted for 11.8% of that value, down from 12.4% in 2019. When the value for hides and all offal products is added, the total offal value plus hides accounted for 20.7% of the export value in 2020, down from 22% in 2019. Variety meats account for a significant percentage of the export value, so what value do these by-products add to the finished steer?

The Agricultural Marketing Service of the USDA reports the by-product drop value for steer. On February 23, 2021 the hide and offal value from a typical slaughter steer was estimated at $9.71 per live hundredweight and includes values for cattle hides, variety meats (i.e., cheeks, hearts, tripe, etc.) and tallow. This value equates to $135.94 for a 1400 lb. steer. This value has been increasing recently and is at a level last seen in May 2018.

Products that add the greatest value to the byproduct value reported by AMS are the hide, tallow, tongue, tripe, oxtail, and cheek meat. International destinations provide markets for products not typically consumed in the US. Japan and Mexico are the leading importers of US variety meats, importing $369 million and $228 million worth of variety meats in 2020. Japan is the leading importer of beef tongue, while Mexico leads in beef tripe. As their import levels of variety meats change, so does the value contribution of tongue and tripe change in the overall byproduct value calculation, which ultimately will impact the finished steer price.

Beef and beef by-products are typically produced in nearly fixed proportions; however, when packers experienced line disruption in 2020, many plants changed fabrication methods to keep more whole muscles/primals intact and keep less offal to maximize line speed. The decrease in beef and offal provided less opportunities for exports and by-product values decreased to $6.79 in May 2020. When these edible offal products are not exported, they will often go into rendering or into pet food and ultimately decrease the overall value of the finished steer.

With the continued recovery from COVID disruptions, by-product production has mostly returned to pre-COVID levels; and given the relatively fixed pounds of by-products per 1,4000-pound steer, the by-product drop value contributions have been increasing due primarily to changes in demand. Beef exports are expected to be up almost 6% in 2021. As exports of beef and variety meats rises, additional support to the finished steer price is provided.

Source: University of Wisconsin-River Fallswhich is solely responsible for the information provided and is wholly owned by the source. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset. 

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