Published on: 12:01PM Jan 23, 2009
The chart of the week is 90% beef trimming prices and the US dollar index. As the chart depicts, 90% beef trimming prices have a tendency to trend inversely with the US dollar index meaning when one market is tracking higher, the other usually moves lower. Why does this occur? Because most of the cattle in the US are grain fed, they have a tendency to be fattier and produce mostly 50% trimmings. Thus the US has to import 90% beef trimmings from countries producing leaner grass fed cows. The 50’s and 90’s are then mixed to produce ground beef. And as we know from previous notes, imports are very susceptible to the valuation of the dollar. When the dollar is relatively depressed, like it was throughout the first half of 2008, it causes a poorer return for exporters to the US. So they have a tendency to ship product elsewhere. Case in point, boneless beef trimming imports during the first 7 months of 2008 were 8% less than the prior year and the smallest for the time period in 5 years. That being said, US beef boneless beef imports have improved in recent months as the dollar has appreciated. What does this mean going forward? That as far as ground beef and trimming prices are concerned a lot will depend on the valuation of the US dollar which in these economic times is very difficult to gauge.
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