Wholesale prices for 90% lean beef have shot higher this year on a trajectory that exceeds last year or the 2018-2022 average, yet a solid reason for the rise eludes many analysts.
“There is so much noise in the grind market that it’s hard to see exactly what is driving it,” said Nevil Speer, independent market consultant in Bowling Green, KY., in a telephone interview.
The weekly average wholesale price for 90% lean beef last week was $303.87 per cwt, according to USDA data compiled by the Livestock Marketing Information Center in Denver. That was up $3.68, or 1.23%, from $300.19 just a week earlier and up $49.25. or 19.3%, from $254.62 in the first week of January.
Last week’s price also was up $45.99 per cwt, or 17.8%, from $257.88 per cwt in the same week a year ago and up $69.23, or 29.5%, from the previous five-year average of $234.64.
PUSHING PRICES
Reasons for higher prices for 90% lean beef are many, Speer said. It could be that retail grocers are trying to put more ground beef in front of consumers this spring.
As inflation continues to climb, the cost of living goes with it, and, despite a low unemployment rate, many households are feeling the pinch, another analyst said. In previous times of strained consumer pocketbooks, they have tended to cut back on the quality of the beef they serve their families before switching to competing meats on a large scale. Grocers may be trying to anticipate such a move.
The US also lost some cow kills in January’s severe winter conditions, Speer said. This would have restricted already tight lean beef supplies and pushed prices.
Beef packers also may be trying to add value to some end cuts, Speer said. Slow sales of some primal cuts may bring some of these products into the trimmings and grind markets.
MORE IMPORTS
Ultimately, the higher prices of 90% beef will bring in more beef imports, Speer said. A strong US dollar could augment the buying power to attract more imports.
The US needs imported beef, Speer said. Since the US beef production system is geared toward choice beef, the availability of lean beef is limited mostly to cows and bulls.
The fed cattle market produces mostly 50% lean beef trimmings, Speer said, and without 90% lean beef to mix with it, the 50% lean beef is virtually worthless. In order to maximize the returns for each animal slaughtered, they need the lean imported beef.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $182.64 per cwt to $185.54, compared with last week’s range of $175.66 to $184.50 per cwt. FOB dressed steers, and heifers went for $283.61 per cwt to $289.83, compared with $282.97 to $288.11.
The USDA choice cutout Thursday was up $1.17 per cwt at $304.20 while select was up $1.24 at $294.18. The choice/select spread narrowed to $10.02 from $10.09 with 101 loads of fabricated product and 29 loads of trimmings and grinds sold into the spot market.
The daily weighted average USDA listed wholesale price for fresh 90% lean beef was $314.01 per cwt, and 50% beef was $106.40.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.35 to $1.45 a bushel over the Mar corn contract, which settled at $4.15 3/4 a bushel, up $0.02 1/2.
No contracts were tendered Thursday for delivery against the Feb live cattle contract.
The CME Feeder Cattle Index for the seven days ended Wednesday was $246.26 per cwt, down $0.54. This compares with Thursday’s Mar contract settlement of $249.00, down $0.60 and Apr’s $253.72, down $1.37.