Adorning the Christmas dinner table with a succulent rib roast is a long-standing tradition for meat lovers. But Americans this year might have to forego this hugely popular holiday item for a lower-priced cut. This is because wholesale rib prices are currently at record levels and might not decline enough to avoid substitution by other beef items.
There tends to be large increases in retail feature activity on ribs in front of Thanksgiving (Nov. 25 this year), as measured by store ad counts, and even larger activity heading into Christmas and New Year, analysts say. More than half the store ad counts are for bone-in rib roasts, followed by bone-in rib steaks and boneless ribeye steaks or roasts. Over the past five years, the average retail feature price on bone-in rib roasts for Thanksgiving ads has been in the area of $8.10 per pound to $8.45/lb. Average feature prices for Christmas have ranged from near $7/lb. to $7.45/lb., analysts say.
Wholesale prices on Choice 109E bone-in ribeyes have tended to be in the $700/cwt to $800/cwt region through September and October, according to analysts. The weekly spot market pricing normally runs up to fall peaks in the latter part of November or early December. But with Choice 109E rib prices recently at record levels near $1,350/cwt, retailers are looking at the potential of serious negative margins on rib features this fall. Prices are far above last year on all rib items. For example, the light Choice rib price the week ending Sept. 25 averaged $581.71/cwt, up 59 percent on the same week last year. It was 70 percent higher the week before that.
Even if ribs do moderate from their record levels, there remains the question of how much upward adjustment in retail feature prices might occur and how that might affect the movement of ribs through those feature periods, analysts say. Some retailers may look at partial substitution of lower-priced loin steaks to moderate margin losses on beef in these holiday periods.
Rib roast lovers thus face the unfortunate consequence of wholesale beef prices that will remain far above last year’s levels well through October. USDA’s overall comprehensive cutout (cuts, grinds and trim) the week ending Sept. 24 averaged $308.03/cwt. This was down $6.78/cwt from the prior week but was still up 44 percent on the same week last year. The price of 50CL fat trimmings was up 178 percent, while the price of 90CL lean manufacturing beef was up 29.5 percent. So even ground beef prices are on the rise, which is of concern, as ground beef is now the best-selling beef item at retail.
The high price of beef forced retail sales to slow significantly during September as consumers were faced with sticker shock in light of few beef features. The bulk of the price advances were predominantly in middle meat items, and retailers reported double-digit declines in both sales dollars and volume. Given the per pound price increases, the per package cost is more than consumers are willing to pay or can afford, says Andrew Gottschalk of HedgersEdge.com.
Retail beef prices kept rising in August and are not likely to peak this year until October. USDA’s Choice beef price in August averaged $7.64/lb., up 11 cents from July. The All Fresh beef price averaged $7.14/lb., up four cents from July. Prices normally go down from July to August, and this was the biggest increase in these two months since 2014, say analysts. Retail prices were expected to be higher again in September. Beef lovers are thus being forced to buy lesser cuts and more pork.
New data from market research firm IRI shows that retail meat and poultry prices increased from the first to second quarter and on through August. Across all measured meat and poultry items in the IRI retail universe, both fixed and random weight, the average price per pound volume paid by shoppers stood at $3.89 in the first quarter and rose to $4.08 in the second quarter, IRI said. The average increased to $4.31 in August. Price increases have affected fresh meat more than processed meat. The 2021 inflation is on top of the increases seen in 2020, leading to double-digit price increases for most areas when compared with 2019, IRI says.
Meat prices, along with food inflation across the store, remained a big topic of discussion in August, the firm said. Its measured retail price paid by shoppers shows that prices continued to rise 4 percent to 6 percent above their elevated 2020 levels for total food and beverages in recent weeks. Meat prices had above-average gains in August amid widespread supply tightness. The most recent (July) numbers from the Bureau of Labor Statistics also showed record increases for restaurant prices and very similar increases for food at home, IRI said. — Steve Kay
(Steve Kay is editor/publisher of Cattle Buyers Weekly, an industry newsletter published at P.O. Box 2533, Petaluma, CA, 94953; 707-765-1725. Kay’s Korner appears exclusively in WLJ.)
