Memorial Day is perhaps the biggest hamburger grilling day of the year, possibly rivaled by Independence Day. Ground beef demand has been strong for the past 12 months after rising sharply in the second quarter of 2021 (indicated by the prices in the chart).
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The ground beef market is large and complex, with two major demand channels in retail grocery and food service. These market channels utilize different and largely separate supply chains that depend on a wide variety of lean and fat sources.
Ground beef at retail grocery typically depends almost exclusively on domestic sources of fresh beef, often marketing ground beef from specific primal sources such as ground chuck, ground round or ground sirloin. Retail grocery ground beef utilizes fatty trimmings from fed steers and heifers, as well as lean beef from cow and bull slaughter, all frequently primal specific, and may include whole muscle grinds.
Retail grocery frequently includes a wide range of lean to fat ground beef products ranging from 70 percent lean (the minimum to be called ground beef) to over 90 percent lean.
Food service ground beef uses a wider range of lean and fat sources. In quick-service restaurants in particular, margins are extremely narrow, and specialized grinders monitor a wide range of ground beef sources to control the price of ground beef within the specifications of each restaurant customer.
Each restaurant chain specifies one or more lean to fat formulations, with the exact lean to fat ratio proprietary to each company. Food service ground beef will include a wide range of fresh and frozen domestic beef trimmings as well as (mostly frozen) imported lean beef trimmings.
The ground beef market plays a critical role in balancing supply and demand for the vast array of products produced by the beef industry. While the trimmings are always utilized in ground beef or other processed products, whole muscle cuts may move into or out of ground beef formulations as the supply and demand for those products fluctuates.
Chuck products may enter ground beef grinds if they are cheap enough, but increased export demands for these products, particularly in Asian markets, have reduced the use of chuck muscles in hamburger grinds. Beef products from the round are leaner and may be used to provide the additional lean needed for ground beef, but they compete with higher value uses of these products, especially for processed products such as jerky.
Fed steers and heifers produce significant amounts of fatty trimmings, which require additional pounds of lean product to make ground beef. For example, 1 lb. of 50 percent lean trimmings mixed with 5 lbs. of 90 percent lean trimmings will produce 6 lbs. of 83.3 percent lean ground beef. While there are many ground beef formulations and many product mixes to achieve them, this 5:1 ratio of 90 percent lean to 50 percent lean trimmings is representative of the ground beef market.
The chart shows the wholesale price for this combination of 90s and 50s for the past several years. Strong demand in the past year has kept the wholesale price of ground beef near record levels, exceeded only by the brief spike that occurred in the initial stages of the pandemic in 2020 and during a few months of reduced supply in 2014-15. — Derrell S. Peel, Oklahoma State University Extension livestock marketing specialist
