Byproduct values decline in recent months
The byproduct value is basically the total value of all the non-meat items collected from an animal after harvest such as liver, tallow, and hides. The values of these non-meat items are a vital aspect not only to beef packer margins, but cattle prices as well. Byproduct values are highly dependant on foreign markets, which have deteriorated dramatically since last summer. The steer byproduct value reached record highs last summer due to many factors including spillover demand from the oil and feedstuffs markets as well as a low U.S. dollar. However, since last fall the global economic contraction has forced byproduct values to record lows.
The summer of 2008 saw the beef byproduct value skyrocket to record highs, as the byproduct value nearly topped out at $12 per cwt. on a live steer basis in July. By November, the byproduct value had fallen below 2007’s on a monthly basis and for December, the monthly live steer byproduct value was at $6.31 per cwt., a loss of $5.65 per cwt. in live steer value since the summer high and 36 percent lower than a year earlier. Although the steer byproduct value did improve some in early 2009, it still averaged only $6.76 per cwt. in January and February versus $10.03 per cwt. and $10.72 per cwt. last year, respectively. By mid-March 2009, byproduct values fell into the $5.00 per cwt. range, the lowest weekly values ever reported by USDA.
Among the different non-meat items that makeup the byproduct value, all the major items have fallen in value since last summer with the hide and tallows posting the largest declines. The hide which accounts for the largest share of the steer byproduct value (over half) traded in the mid to high $50 per hide last year, but due to the global economic contraction it has fallen drastically as the demand the for luxury items (i.e. leather car seats, jackets, etc.) has eroded. By December the hide had fallen to $29.24 per hide versus $57.27 per hide in the 2007. Although the hide did gain a few dollars in January, gains were short-lived as the hide hit a new record low of $28.40 per hide in February, one-half the value of a year earlier. The hide value has been a key factor in the decline in the byproduct values since last summer. Of note, compared to a year ago, tallow values were down 50 percent in February.
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