REPORT

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BEEF

Cash cattle traded at $120 last week, up $1 from the previous week. Market-ready

cattle available this week are slightly higher, but we will continue to be in the tightest

fed cattle supplies of the year. Even so, cash cattle are trading slightly lower.

Steer and heifer slaughter for January was 4.8% higher when 1%-2% was expected.

February and March fed slaughter is expected to be 5%-6% higher year-over-year.

Board (futures) economics continue to dictate active marketings with feeders pulling

ahead market-ready animals. Total slaughter last week was 577K head, down 16K

head from the previous week, but 30K head higher year-over-year. However, feed

kills remained the same week over week. Placements this last fall suggest larger fed

supplies starting late March/early April with fed slaughter levels expected to be 4%

higher than last year, increasing 5%-7% moving into June.

With the greater supply during the most lackluster demand period of the year, packers

were forced to discount many cuts to alleviate inventories. With packers firmly

entrenched in the red, further reductions in kill are anticipated, but it has yet to really

be seen if they can remain disciplined.

Carcass weights continue to drop…22 lbs lower since the beginning of January. That

is curbing overall beef production. Weights will continue to decline seasonally into the

spring and are expected to range below last year’s levels. With more heifers in the

slaughter mix, weighted product availability is expected to increase slightly into the

spring.

Overall Box Situation

Spot market box volumes are running slightly higher than last week, with most of the

increases being in the Rib and Loin sections along with Briskets at the expense of the

End Cuts. Select and ungraded product continue to be in short supply due to continued

excellent cattle grading. Choice pricing to Select on several items such as Briskets,

Teres Majors muscle, Chuck Rolls, Peeled Knuckles, and Insides are all inverted not due

to increased demand, but simply lack of supply with pricing determined on what the

market will bear. This is expected to continue into spring and afford the opportunity to

Sub Choice for lesser grades at a lower cost.

GRINDS

81/19 FINE GRIND: Knuckles were discounted to move inventories. There is

slight upside potential in March with inventories in better position, but the market is

expected to drift off into May.

ROUNDS

PEELED KNUCKLES: All grades of Peeled Knuckles moved lower on a lack of

demand from both the primary and grind processing sectors. They are expected to

remain weak into April.

INSIDE ROUNDS: Insides were discounted to move inventories. However, there

were large forward orders shipping for retail features, which is expected to support this

market with modest advances into and through most of March.

BOTTOM ROUND FLATS: Bottom Round Flats continue to be weak with only a

slight possibility of a limited rebound in March.

EYE OF ROUNDS: Eyes of Rounds moved lower and are subject to more

downside risk moving into spring.

LOINS

STRIPS: Large volumes of Choice Strip Loins sold last week at a discount. Select

pricing was supported by good cattle grading. Seasonal lows most likely have occurred

with moderate advances expected through mid- to late May.

TOP BUTTS: Top Butts continue to find support from good spot demand; Select

more so due to grading. There is little risk to the downside. Modest increases are

expected into late May.

TENDERLOINS: Tenders traded steady last week with large volumes of Choice on

spot and forward orders. Downside is now limited. Modest advance are expected from

now till May.

RIBS

RIBEYES: Light Ribs reported lower. More product was available due to falling

carcass weights and dull demand. There is some downside risk moving into March,

but it is now considered limited. Modest advances are expected into May. Heavy Ribs

continued to be discounted to move inventories. Some downside risk remains, but

limited. Modest to moderate gains are anticipated moving into late May.

CHUCKS

CHUCK ROLLS: All grades of Chuck Rolls moved lower on good spot demand at a

lower cost. They are expected to hold their value for the next several weeks and trade

mostly sideways before drifting lower from early May into summer.

TERES MAJORS: Teres Majors continue to move higher on good demand from

all sectors and seasonally small slaughter levels. There is some downside risk, but

Teres Majors are expected to rise modestly into late May.

BRISKETS: Briskets were discounted last week to move inventories. With packers

in better inventory positions, and large forward orders posted as well, the market is

expected to be supported with slight gains moving into April.

THIN MEATS

BALL TIPS: Ball Tips were mixed last week on decent volume. They are finding

support on good interest, and are expected to advance modestly into mid- to late April.

FLAP MEAT: Flap declined much greater than expected, but was needed to move

inventory. There is more upside potential than down, and they are expected to drift

higher into March with more seasonal advances peaking in April.

FLANK: All grades of Flank moved higher on good demand. Flank is expected to

move moderately higher, peaking in late May.

SKIRT STEAK: Outside Skirt moved slightly higher last week but jumped

considerably this week. Seasonal lows are at hand with modest advances expected into

April, and more moderate increases expected moving into mid- to late May.

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