Wholesale choice beef prices are up, and have been since the Aug. 8 fire at Tyson Foods’ Finney County, KS, beef plant, but the whole-carcass gains don’t show the whole picture.
Some cuts are up sharply from last year amid seasonal and changing consumer desires while others either lag or remain within the confines of logical seasonal patterns.
INITIAL KNEE-JERK PUSH
When the fire closed the Tyson plant, prices for most cuts of choice beef shot higher, in what most traders now believe was a knee-jerk fear that fed cattle slaughter would be curtailed dramatically right before a seasonal surge in holiday beef buying.
However, beef packers keeped cattle slaughter at a pace that cleared feedlots of slaughter-ready animals. The result was an equally sharp decline in wholesale choice carcass values starting three weeks after the fire as buyers realized product would be available.
ECONOMIC GROWTH SPURS BEEF BUYING
Some market observers and analysts cite the US’ economic growth over the last several years for the increase in demand for choice beef. The US Department of Commerce’s Bureau of Economic Analysis lists personal income in the third quarter of 2019 as being up 1.7% from a year earlier with personal disposable income being up 2.9% and personal savings up 8.1%.
That allows for more buying interest among consumers for marginal items, like better-tasting (choice) beef. (For what it’s worth, Anna Meyer, web producer for Inc.com, said holiday sales this year were expected to be a record, topping $1.1 trillion.)
Market economists also will say that one of the first things to go when the US economy begins to drift toward recession will be a willingness to pay up for marginal items like choice beef. When consumers begin to feel pinched, they will switch to less-expensive things to meet their needs. There will be less interest in leather car seats, for example.
Consumers also will switch to less expensive food products, the economists will say. Buying interest will shift gradually toward select beef and then to less beef entirely. They might not switch to pork, but they might eat more leftovers and a little more chicken.
When that happens, choice beef prices will fall, analysts said.
90% LEAN BEEF JUMP; STILL CLOSE TO AVERAGE
One product that has gotten some attention recently has been the 90% lean boneless beef product. This product usually is sold as ground beef and nowadays commands a premium because of its low fat content.
Prices for 90% lean, or “90s”, are up with the USDA last week quoting it at $231.80 per cwt, compared with $227.26 a week earlier and $219.93 the week before that. This is up sharply from last year’s $189.45 but close to the 2013-2017 average of $222.48.
Wholesale prices for 50% lean beef also are up from the annual low of $43.14 per cwt to last week’s $87.89, but are only a little above the $82.07 average.
CATTLE, BEEF RECAP
Cash cattle trading last week took place late at $114 to $116 per cwt on a live basis, up $2, while dressed-basis trading ranged from $181 to $182 per cwt, up $1 to $2.
The USDA choice cutout Tuesday was up $1.91 per cwt at $240.50, while select was up $2.54 at $216.23. The choice/select spread narrowed to $24.27 from $24.90 with 69 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Monday was $147.24 per cwt, up $0.72 from the previous day. This compares with Tuesday’s Nov contract settlement of $147.80, up $0.22.