The boxed beef cutout value added to its rally with another strong week last week. The weekly weighted average for choice beef was $221.18. This is up $4.65 over the previous week and up nearly $13 over two weeks ago. As you can see in the chart above, 2018 value has been above 2017 values for every week so far. This continues to tell the story of strong beef demand. You may recall the sharp Spring rally in the beef market that occurred last year. While the current value is above year-ago levels, market fundamentals are a little different this year.
The BBCOV is reported by the USDA Agricultural Marketing Service and it provides an overall performance indicator for the fabricated beef industry. It is an estimate of the dollars per cwt for a fabricated carcass. It is not an observed price for an entire fabricated carcass sold in boxed form. Rather, the BBCOV estimates the value of a beef carcass based on prices paid for individual beef items from the carcass. Values of primal cuts (i.e. Rib, Chuck, Round, Loin, Brisket, Short Plate, and Flank) are calculated from prices paid for sub primal cuts. The BBCOV is then calculated using the estimated value for each primal and the average industry cutting yields.
As we discussed in last week’s article (available HERE), the magnitude of the 2017 Spring rally may be harder to attain this year due to the timing of larger supplies. Larger beef production is expected during the second quarter of 2018 than in 2017 which will provide more product for retailers to purchase. The Livestock Marketing Information Center projects a 6.3 percent increase in the amount of beef production during Q2 of 2018 as compared to Q2 of 2017.
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