Americans’ appetite for ground beef is great news for cow-calf producers. Given the tight supplies of lean manufacturing beef, cull cows have become almost as valuable as gold. Demand for cull-cow beef is outstripping the domestic supply, which has meant record-high prices for lean boneless beef (90CL), cow carcasses and the cows themselves.
Cull cows historically have accounted for 20% of a cow-calf producer’s annual income. This might have risen a notch or two over the past year, although calf prices have also hit record levels.
Remember when cattlemen cheered when live cattle prices hit $85 or $90/cwt.? That’s where prices for lean cull cows were at the end of May. It’s startling to realize that cows are worth as much as a fed steer or heifer was worth only a few years ago.
The same kind of advance is seen in cow beef prices. A cutter cow’s carcass cutout value the last week of May averaged $180.08/cwt. It wasn’t long ago that this was a record-high price for the Choice cutout from fed cattle. The Choice cutout, incidentally, averaged $196.83 at the end of May. The fact that a cow carcass was only $16/cwt. lower in value than a grain-fed carcass is remarkable.
Not surprisingly, the price of 90CL continues to set weekly records (for eight weeks in a row to the end of May). The record-high prices have finally attracted a lot more lean beef from Australia. Its exports to the U.S. for the year to June 5 were up 100 million lbs. on last year. But exports from New Zealand and Canada were flat. The next biggest increase came for Mexico. Its total beef exports to the U.S. were up nearly 20 million lbs., with nearly all of it in lean beef.
Sadly, Mexico’s exports were up because of its catastrophic drought, which forced more cows to slaughter. Mexico’s worst drought in 70 years continues to devastate its cattle population and crop production, especially in the northern part of the country. More than one million cattle have died as a result of the drought, which is well into its second year and shows no signs of abating.
The drought has also forced more young cattle north of the border. That’s helped Southern Plains cattle feeders fill their pens as domestic supplies of feeder cattle shrink. But the drought will likely have negative implications for cattle feeders next year. They’ve seen 24% more (152,000 head) Mexican feeder cattle come north, as of June 2, compared to last year.
But this might mean a huge decline in imports next year, as occurred in 1996 after a drought-inflated import number the year before. The decline in Mexico’s cow numbers also means its total cattle population might take five years or more to recover even to current levels.
Mexico’s Ministry of Agriculture forecasts that exports of live cattle (nearly all feeder cattle to the U.S.) will total 1.43 million head in 2012. This would be the largest number since 1995’s record imports of 1.65 million head, which was related to severe drought. Imports fell dramatically the following year to only 450,000 head, which suggests that imports in 2013 might also decline by 1 million head. This might mean a lot of empty pens for U.S. cattle feeders.
Meanwhile, USDA data confirm predictions about the consequences of Beef Products, Inc. being forced to slash production of its lean finely textured beef (LFTB). In the 10 weeks from the week ending March 30, the volume of 73CL grind sold increased 24.5% over the same 10-week period last year. Conversely, the volume of 93CL declined 25.4% and the price increased 39¢/lb. The media assassination of LFTB has forced consumers to buy fattier ground beef and pay more for the leanest grinds.
Steve Kay is editor and publisher of Cattle Buyers Weekly (www.cattlebuyersweekly.com). See his weekly cattle market roundup each Friday afternoon at beefmagazine.com.
