Consumer demand for meat, especially beef, continues to rage, despite a higher cost of living.
The latest Consumer Price Index from the Bureau of Labor Statistics Wednesday showed a rise of 8.5% over the last 12 months ending in July, down from a 9.1% rise a month earlier, despite higher retail meat prices.
A 7.7% decline in gasoline prices was cited for balancing food and energy costs, which are more volatile. The core CPI, as it is called, was up 0.3% from June and up 5.9% from a year earlier.
But food costs were up 10.9% in July from a year ago. And, the Food Index, which was up 1.1% from June, recorded the seventh straight monthly rise of 0.9% or more.
BEEF MARCHES ON
It’s apparent that some buying interest is shifting toward less expansive products, but data shows many consumers are hanging on to choice products.
A market analyst said he and others expected inflation to squelch consumer beef buying, but it never happened.
USDA data compiled and published by the Livestock Marketing Information Center shows wholesale beef prices holding within a narrow range well above the 2016-2020 average.
Last week’s choice boxed beef price averaged $268.44 per cwt, up $63.39, or 30.9%, from the five-year average of $205.05. Comparisons to last year are hard because it was a COVID year, and prices tended to be timed with federal stimulus checks.
Another analyst said those federal checks could be the reason consumers continue to buy beef.
A cattle trader said US beef “exports are awesome, even with a high dollar, employment is 100% in the private sector when compared to pre-pandemic levels, and equities today were declared entering into a bull market.”
CHOICE OVER SELECT
An LMIC graph showing the spread between wholesale choice and select beef also showed that consumers were willing to pay for the higher-priced USDA-graded choice beef over the lower-priced USDA select. Last week’s choice/select spread was $26.63, up $8.20, or 44.5%, from $18.43 in the same week a year ago and up $15.21, or 133.2%, from the previous five-year average of $11.42.
What’s more, while the choice/select spread had been following the seasonal trend through May, it left the seasonal pattern then and continued upward while the five-year average dropped away into a September low. It shows no sign of slowing down.
With employment high, many consumers may feel they want to spend the extra to get the choice beef they have come to expect.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $137.70 to $141.51 per cwt, compared with last week’s range of $135.00 to $142.13. FOB dressed steers, and heifers went for $212.48 to $215.54 per cwt, versus $212.71 to $217.25.
The USDA choice cutout Wednesday was down $1.50 per cwt at $263.23 while select was off $0.62 at $237.08. The choice/select spread narrowed to $26.15 from $27.03 with 100 loads of fabricated product and 34 loads of trimmings and grinds sold into the spot market.
The USDA said basis bids for corn from feeders in the Southern Plains were steady at $2.60 to $2.70 a bushel over the Sep futures and for southwest Kansas were unchanged at $0.10 over Sep, which settled at $6.21 1/4, up $0.05 3/4.
No new delivery intentions were tendered for deliver against the Aug contract Wednesday. Ten heifer contracts were retendered and demanded at one on Wednesday.
The CME Feeder Cattle Index for the seven days ended Tuesday was $176.53 per cwt up $0.13. This compares with Wednesday’s Aug contract settlement of $180.67, up $1.87.