Beef demand has remained remarkably strong since the pandemic started in March, said Derrell Peel, Oklahoma State University Extension livestock marketing specialist, in a letter to Extension agents called Cow/Calf Corner.
The first half of 2020 saw unparalleled disruptions in beef supply and demand, Peel said. But since July, steer and heifer slaughter has averaged 0.5% more than year-ago levels, he said. Total fed beef production is up 3.7% year over year from July to the end of October.
BEEF DEMAND CHALLENGED
Beef demand, however, continues to be challenged with restricted food service, Peel said.
Retail grocery demand remains robust as adjustments helped shift some food service supply chains to retail grocery supply chains, he said. There are indications that retail grocery demand is being boosted again by consumers stocking up in the face of increased uncertainty.
The shift from summer beef demand to winter raises additional concerns because food service faces problems with the loss of outdoor dining, worsening public health challenges, less unemployment support and ample supplies of beef, pork and poultry.
The current state of beef demand is tricky to assess, he said. Choice boxed beef prices have increased sharply the past two weeks after falling from Labor Day through the end of October. However, choice beef prices the past two weeks averaged 9.2% below a year ago, with the rib primal down 4.4%, the loin primal down 10.2%, the chuck primal down 8.4% and the round primal down 6.6%.
MORE INSIGHT
Specific wholesale cuts provide additional insight, Peel said. Ribeyes, a key holiday item, are following close to a typical seasonal increase with current prices close to year-ago levels and up more than 9% the last two weeks.
Other food service-dependent beef products are less encouraging, he said. Tenderloins currently average 25.6% below year ago levels and are down 1.5% in the last two weeks. Sirloin top butt is up 6.0% the last two weeks but down 18.4% year over year.
Other beef products heavily dependent on food service demand include brisket, down 13.9% from one year ago and the petite tender, down 20.7%, Peel said. Strip loin, is up 7.8%.
Most chuck and round products are down 5% to 10% with few exceptions, he said. However, several chuck and round products are up double-digit percentages in the past two weeks. Chucks (2-piece) are up 7.0% and up 13.7%, which may indicate more demand for grinding for retail grocery ground beef.
In contrast, 50% trimmings are down 55.7%, and 90% trimmings are down 15.8% year over year, although both are up the past two weeks, Peel said. 50s and 90s more commonly are used for food service ground beef.
CATTLE, BEEF RECAP
Fed cattle trading this week was seen at $109 to $110.25 per cwt, mostly $110, on a live basis, down $1 to up $0.25 from last week. Dressed-basis trading was done at a steady $172.
The USDA choice cutout Wednesday was up $2.12 per cwt at $235.84, while select was down $0.34 at $213.62. The choice/select spread widened to $22.22 from $19.76 with 103 loads of fabricated product and 39 loads of trimmings and grinds sold into the spot market.
The USDA reported Wednesday that basis bids for corn from livestock feeding operations in the Southern Plains were unchanged at $1.10 to $1.15 per bushel over the Dec CBOT futures contract, which settled at $4.25 3/4 a bushel, up $0.05 1/2.
The CME Feeder Cattle Index for the seven days ended Tuesday was $137.38 per cwt, down $0.17. This compares with Wednesday’s Nov contract settlement of $137.02 per cwt, down $0.35.