The grilling season has begun, and it is less than a month to the best beef demand period of the year. I’m referring to the week leading up to the Memorial Day holiday on May 29. Many Americans have already fired up their grills. Warm, dry weather is an important ingredient, and I noticed that retail beef sales the weekend before last suffered a little because of poor weather in some areas.
Strong beef demand is always vital but especially now because cash live cattle prices recently soared to new record highs. The average price two weeks ago of $180.44/cwt live for a 5-area steer was up $7.34/cwt from the prior week, up $16.04/cwt in three weeks and up 24% from the same week last year. But the advance stalled the week before last, and the market might see a retreat this month before another rally. Live cattle prices going forward will depend on the size of packer margins and packers’ willingness to keep paying higher money for their raw material.
All eyes will now turn to demand, say analysts. The industry is currently in the best beef demand period of the year, says Andrew Gottschalk of HedgersEdge.com. A mid-May peak for beef cutout values is likely, as Memorial Day pricing is generally completed by that timeframe. Retail beef margins are being minimized at current cutout values. Some retailers, though, may elect to hold the line on advancing their average retail beef prices until after Memorial Day. Regardless of exactly when, he expects retailers to begin advancing their average prices to restore their margins. As such, the real test for beef demand has yet to be determined, he says.
It does not appear that consumer beef buying behavior has changed significantly thus far despite higher retail beef prices, says Derrell Peel, Oklahoma State University Extension livestock marketing specialist. There is little indication of consumers trading down, i.e., switching to lower value products and away from more expensive beef cuts.
USDA’s retail All Fresh Beef price in March averaged $7.23 per pound, unchanged from February and down 1.8% from one year ago. The Choice beef price averaged $7.64/lb., up 5 cents and down 0.7% from last year.
Retail beef prices have been mostly steady since late 2021, says Peel. The 12-month moving average of monthly prices has been above $7.25 per pound since April 2022. This indicates strong beef demand given record beef production in 2022 and the highest beef consumption per capita at 58.9 pounds (unchanged from 2021) since 2010. Retail All Fresh beef prices averaged $7.30 per pound in 2022, the highest on record and were up 5.1% on 2021 average prices. The highest monthly price ever was in October 2021 at $7.55 per pound, he says.
Wholesale prices continue to be led by strong middle meat prices, with tenderloins and ribeyes up 12-15% year-over-year, says Peel. Chuck and round wholesale values are mixed but chuck primals are up 10% year-over-year and rounds are unchanged. Briskets remain weak compared to last year. Both 90CL and 50CL beef trimmings have advanced significantly thus far in 2023, pushing ground beef prices higher. Higher ground beef prices are partly due to stronger demand but are mostly due to decreasing supplies of processing beef. Boxed beef prices pushed higher as a result of decreased beef production and are being supported by continued strong beef demand, he says.
How the major packers see the future of the beef industry is always of considerable interest. So, I was fascinated to read that protein giant Cargill sees growth in a number of what are loosely called value-added protein products in response to consumer demand. Cargill’s North American protein business detailed the information it was seeing in the market and explained its strategy moving forward given the current protein landscape at this year’s Annual Meat Conference.
The first area Cargill discussed was value-added protein, according to a Meat+Poultry report. Cargill has seen growth in that sector as customers have continued to demand value-added meat products in the last few years, it said. A value-added product does not always have to be fully prepared, seasoned or marinated, said Cargill’s Scott Vinson, citing company data. It can also include a product in a different form, including thinly sliced, diced or lean meat.
According to Cargill’s trend information, 73% of consumers want meals ready in 30 minutes or less. The leaders at Cargill understand it is about finding a balance between people who need protein fast and those who still want to cook at home. Vinson thinks you can do both if you give it to them in a form that makes it easier for them to prepare. Back-to-work mandates are in part driving this needs-to-be-easy, needs-to-be-fast trend. Cargill saw it before the pandemic but now demand has really skyrocketed, he 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.)
