Hog Byproduct Values Show Improvement

US - The byproduct value is the total value of all non-meat items produced from an animal such as cheek meat, hearts, livers, tripe, tongue, meat and bone meal, edible and inedible tallow, and hides, explains the latest Daily Livestock Report published by Steiner Consulting Group.
calendar icon 21 October 2016
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Exports are a driver of most byproduct values. Variety meats have a much higher consumer preference in overseas markets including Asian countries and Mexico, and most US hides are processed overseas. These byproduct values are also a factor for packer margins.

Both steer and hog byproduct values have seen slow but steady price support so far this year. Steer byproduct values are reported by USDA on a weekly basis. The values of each byproduct are calculated based on a 1400 pound slaughter steer, on a 63 per cent dressed equivalent basis, and set table of pounds of byproduct per 100 pounds of steer.

Steer byproduct values bottomed around $10.50 per cwt. the end of 2015, and have rebounded since then, according to the USDA report. As of mid-October, the steer byproduct value was $11.46 per cwt., compared to $11.23 a year ago and $13.54 for the past five year average (2010 to 2014).

Within the steer byproduct categories, the hide is largest contributor to the overall value. Most of hides in the US get shipped to China for processing then shipped back or to other countries for further use in leather products.

As of mid-October the Heavy Native steer hide was priced at $75 per piece, this is up $7 from a year ago.

Other beef variety meats that have experienced higher prices compared to a year ago include: head meat, oxtails, and the semiannually contracted pet food items. Livers, lips, heart, and cheek meat prices are all tracking below their year ago levels.

Hog byproduct values are also reported weekly by USDA. As of mid-October, hog byproduct values were at $3.82 per cwt., slightly improved compared to their year ago level of $3.26 per cwt. but still below the past five year average of $5.46.

Within hog byproduct categories, heart and stomach prices are above their year ago levels, while cheek meat and liver prices have fallen below their respective year ago levels. Factors that strongly influence these byproduct values include live animal supply and exchange rates.

During 2014 and the first half of 2015, steer byproduct values increased to record levels due to tight live animals supplies and continued strong international demand. As the exchange rate became more unfavourable for our international customers, and our domestic cattle and therefore byproduct prices became increasingly high, that international demand at those record high priced levels faded quickly.

This year, cattle supplies are up, and the exchange rate is slightly more favourable (for some countries) against the dollar currently compared to a year ago. Usually, the byproduct value is watched closely due to its impact on packer margins, but it is not playing as huge of a role this year due to already very favourable packer margins on only marginally better byproduct values.

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