Lauren Clark, in a 2019 Masters of Science thesis called “Disaggregating Beef Demand,” provided a detailed account of the ground beef market.
A summary of the thesis was published in a letter to Extension agents called Cow-Calf Corner.
Ground beef at retail typically depends almost exclusively on domestic fresh beef, often marketed as from specific primal sources like the chuck, round or sirloin. It utilizes fatty trimmings from fed steers and heifers as well as lean beef from cow and bull slaughter and may include whole muscle grinds.
Retail grocery frequently includes a wide range of lean to fat products ranging from 70% lean (the minimum to be called ground beef) to more than 90% 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 many sources of ground beef to control the cost of product within the specifications of each restaurant customer.
Food service ground beef will include a wide range of fresh and frozen beef trimmings from domestic and imported sources.
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 trimmings always are 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 the muscle cuts fluctuates.
Chuck products may be ground if they are cheap enough, but increased export demand, particularly in Asian markets, have reduced the use of chuck muscles in hamburger grinds.
Beef round products 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 like jerky.
FAT VS LEAN
Fed steers and heifers produce significant amounts of fatty trimmings, which require additional pounds of lean product to make ground beef.
For example, one pound of 50% lean trimmings mixed with five pounds of 90% lean trimmings will produce six pounds of 83.3% lean ground beef. While there are many ground beef formulations, and many product mixes to achieve them, this 5:1 ratio of 90% lean to 50% lean trimmings is representative of the ground beef market.
Strong demand for the past year has kept 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 a few months of reduced supply in 2014/2015.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $139.71 to $147.00 per cwt, compared with last week’s range of $138.39 to $143.18. FOB dressed steers, and heifers went for $217.18 to $218.57 per cwt, versus $216.86 to $220.73.
The USDA choice cutout Thursday was down $0.77 per cwt at $266.65, while select was up $0.72 at $249.63. The choice/select spread narrowed to $17.02 from $18.51 with 106 loads of fabricated product and 25 loads of trimmings and grinds sold into the spot market.
The USDA reported that basis bids for corn from feeders in the Southern Plains were unchanged at $1.55 to $1.65 a bushel over the Jul futures and for southwest Kansas were steady at even the Jul, which settled at $7.30 1/4 a bushel, down $0.01.
The CME Feeder Cattle Index for the seven days ended Wednesday was $153.48 per cwt up $0.12. This compares with Thursday’s Aug contract settlement of $172.95, up $3.22.