8-21-20 – Wholesale beef prices are rising rapidly, driven by gains in higher-priced cuts, even though restaurant demand has been slashed by the Great Lockdown.
Boxed beef prices apparently are rising sharply as retail grocers step into the spot market to shore up supplies ahead of the Labor Day holiday, a market analyst said. With many eateries closed or getting by with socially distanced seating arrangements, it’s hard to think the restaurants are causing the pull on prices.
And daily price gains in USDA reports this week have been astounding, pulling hard on price graphs.
The analyst found it fascinating that US consumers continue to consume, even though millions are out of work. He said that the bulk of the jobs lost to the COVID-19 lockdowns appeared to have been among the population segment with the lowest incomes, leaving the employed still with spendable income.
The economy has adjusted rather than collapsed, he said.
Other market analyst continued to wait for the other shoe to drop as layoffs continue.
In fact, the number of those filing for unemployment insurance for the first time rose last week by 1.1 million people, an increase of 135,000 from the previous week, according to CBS News, and another 543,000 filed for Pandemic Unemployment Assistance.
What’s more, 28 million people, or about 20% of the US workforce, were receiving some sort of unemployment assistance as of August, CBS News said.
SEASONAL DEMAND PULL
In many ways, the current price gains fall within seasonal norms, USDA data showed. Weekly USDA average prices for choice 600- to 900-pound carcasses show higher prices for last week, and daily price reports show gains every day this week so far.
Last week’s USDA weekly average price for choice beef was $209.91 per cwt. This compared with the previous week’s average of $204.52 but was $20.52, or 8.91%, below the $230.43 price of the same week a year ago and $12.31, or 5.54%, below the 2014-2018 average of $222.22.
However, without the same level of restaurant pull, the demand should be on cheaper cuts of beef, the analysts said, but it’s not. The focus seems to be on higher-quality, higher-priced cuts.
The weekly average price for boneless, light beef ribeyes last week was $797.16 per cwt, up $44.13, or 5.86%, from $753.03 a week earlier and up $66.48, or 9.18%, from the latest bottom of $730.68 four weeks earlier.
Last week’s average ribeye price was $48.37, or 5.72%, below last year’s $845.53 per cwt level, but $38.50, or 5.07%, above the previous five-year average of $758.66.
Compare that with weekly average prices for fresh 50% lean beef prices. Aside from the unusual COVID-related spike in April and May, prices have stayed below the 2014-2018 average all year, and if consumers had been going for cheaper meats, this should have shown more strength, an analyst said.
Future developments will be interesting.
CATTLE, BEEF RECAP
Fed cattle trading was reported in the Plains this week at $106 to $109 per cwt on a live basis, up $3 from last week. Dressed-basis trade was steady to up $4 at $168 to $172.
The USDA choice cutout Thursday was up $2.34 per cwt at $225.38, while select was up $0.66 at $206.31. The choice/select spread widened to $19.07 from $17.39 with 109 loads of fabricated product sold into the spot market.
No steer or heifer contracts were tendered for delivery Thursday against the Aug live cattle futures contract.
The CME Feeder Cattle Index for the seven days ended Wednesday was at $142.80 per cwt, up $0.18. This compares with Thursday’s Aug contract settlement of $143.42 per cwt, down $0.12.