Market Update:

5 Area Weighted Fed Cattle Price – Last week’s 5-Area Weighted Fed Cattle live price was $126.24, with Dressed cattle at $202 to $204.

Wholesale (Boxed Beef) prices were up sharply for the week with USDA Choice beef closing at $204.98 and USDA Select closing at $191.20. The Choice-Select spread continues to widen as grilling season heats up and closed at $13.77.

Feeder and Stocker cattle traded steady to lower last week with yearling feeders in some areas trading anywhere from $3 to $9 lower. Heavy yearlings weighing 800-1000 pounds and coming off wheat in the Southern Plains were up to $9 lower. Stockers were generally steady to $5 lower. Slaughter cows were steady to $2 higher with bulls mostly steady. The USDA Cutter Cow carcass cut-out value was $160.03.

Cattle feeding margins declined about $12 this week, with feedlot losses averaging $103.80 per head. A year ago fed cattle sold for $119.90 with losses of $61.89 per head.

Average Packer margin have improved sharply over the past 2-3 weeks with packers now moving into the black on improvements of $37 or more per head. The average packer margin is now at $19.55 per head.

Industry Updates:

A researcher in the Netherlands has produced the world’s most expensive hamburger at a cost of $325,000. The hamburger was created from pieces of beef muscle grown in a lab which resulted in a 5 ounce product, or about the size of your typical “Quarter Pounder”. The hamburger was produced by growing strips of muscle tissue from stem cells. The scientist, Dr. Mark Post at Maastricht University, used a total of 20,000 muscle strips to produce the 5 ounce hamburger. If we put this on a per pound scale, the hamburger actually comes in at a whopping price of $65,000 per ounce or $1,040,000 per pound! So we now have our first $1 million dollar hamburger! Dr. Post stated that the meat actually tasted “reasonably good”. To be honest, at $1 million per pound, I would expect the taste to be far beyond, “reasonably good”. The cells used to grow the hamburger were taken from neck muscles from a slaughtered cow and fetal calf serum was used in the medium for the muscle cell growth in the lab. Dr. Post stated that the artificial meat would likely never completely replace the world’s cattle herds but that he would be glad to “reduce the global herd a million fold…”. The research was paid for by private donations from Peter Thiel, the co-founder of PayPal.

A recent survey conducted by Midan Marketing and Shugoll Research titled “The Power of Brands in the Meat Case” showed that consumers bought beef, pork, and poultry less frequently in 2012 compared to 2007. The survey showed that consumers are slightly less willing to pay premiums for branded products, but that when they do pay premiums, they are expecting a premium on taste. Meat sales have increased at supercenters and club stores compared to grocery store purchases and consumers have reduced their overall frequency of protein purchases with increased sensitivity to price and taste. Consumers do believe there is a difference between branded and non-branded meats and their number one factor in purchase decisions between branded and non-branded was price, followed closely by meat quality, tenderness, and taste. At least half of all consumers state they are willing to pay up to 20% more for their preferred brands. The study did find that taste has become quite important to consumers and are less willing to compromise on taste. Therefore, they are making fewer overall purchases but are willing to pay more for better tasting proteins when they do make purchases. They want the best possible price without sacrificing taste and quality. The study also revealed that consumers are willing to listen to messages about quality, taste, and tenderness. This may help explain why we are seeing a sharp increase in sales of grass fed beef over the 1st quarter of 2013.

Smithfield Foods Inc. has started to convert several of their processing plants to ractopamine-free production in response to consumer demand for pork that is produced without the feed supplement. The company hopes to have as much as 50% of it’s total operations represent ractopamine-free production. That means a significant decrease in the use of ractopamine in feed rations. Ractopamine is an FDA-approved supplement that has been used in swine rations for many years now and is also used in beef feedlot rations. Ractopamine is a beta-agonist or ”repartitioning agent” that stimulates increased lean muscle tissue growth prior to fattening. However, the European Union, China, Russia, and many other countries have banned the use of ractopamines in livestock rations and will not accept imports that have been produced through ractopamine feeding. Smithfield feels that they can establish a strong competitive advantage by curtailing the use of ractopamines in their rations. When the targeted plants are fully converted to ractopamine-free, Smithfield will be producing 43,000 ractopamine-free hogs a day. My guess is that the “trickle down” effect will permeate into the beef sector as well and eventually significantly reduce the use of ractopamines in beef production.

Researchers at the University of Denmark have stated that breaking up grass leys or grasslands through activities such as plowing cause release of nitrous oxide (also known as laughing gas). These scientists state that nitrous oxide has a global warming potential approximately 300 times greater than carbon dioxide. Grasslands frequently have legumes in the mix of forages and legumes tend to fix nitrogen, whereas overall forage growth helps store carbon dioxide in the soil. The researchers found that by breaking up the grasslands through plowing, the decomposition that takes place cause release of significant amounts of nitrous oxide. Their field trials show that by employing shallower techniques, such as cultivators to break up the soil, decomposition takes place closer to the soil surface and limits nitrous oxide emissions. Currently, about 8% of Danish farmland is made up of grass leys that are part of livestock-crop rotations. The scientists did state that earthworms could have an impact on this process and that is the next step in their research. So, we now have recent research that states that methane released by ruminant livestock grazing grasslands is potentially damaging to the atmosphere and contributes to global warming, but other research stating that breaking up these grasslands, through some sort of cultivation to grow crops, releases nitrous oxide, with powerful global warming potential. Hmmm…….