Consumers Turning To Hamburger?

It’s beginning to look like consumers in general are turning to other cuts of beef as unemployment and inflation bite harder on the pocketbook.

Beef trimmings prices are rising while some middle meats are declining, although just how much is because of seasonal changes, economic realities or supply issues is hard to parse.

Econ-101 taught us that a healthy, slowly growing national economy must have a certain level of unemployment.  But this doesn’t fly well in political speeches, nor are the unemployed spread evenly among the population.

Scott Brown, University of Missouri livestock economist, writing for the Missouri Ruralist, said some consumers are opting for ground beef over pricier steaks, even though the choice boxed beef cutout value has held at more than $3 a pound since mid-May.

 

USDA PRICE DATA

 

Four primal cuts — the chuck, round, loin and rib — account for 85% of the beef cutout value calculation, Brown said.

Examining prices for the first three weeks of July, back to 2004, shows that this year, the round posted a sharp value increase relative to the entire boxed beef cutout (+15.7% versus 2023, and 5.6% above the 2015-19 average), he said.  Chuck values also were higher, while those for the loin and the rib have decreased.

So, when demand for ground products is running relatively strong, chucks and rounds tend to benefit, Brown said.

 

BEEF DEMAND TREND INFLUENCERS

 

Round values particularly thrive when leaner trimmings are sought, he said.  Over the past 10 weeks, 90% lean fresh beef trimmings set price records, and the ratio of 90% lean to 50% lean trimmings values has been above the historical average for most weeks.

Historically, during the first three weeks of July, the round primal shows strength against the entire beef cutout, particularly in 2008 and 2011, years when US GDP growth was negative and beef demand was weak, Brown said.

However, in 2015, despite high beef prices, the higher round primal values were more of a supply story, as cattle herd rebuilding reduced cow slaughter and limited trimmings availability, he said.

 

CONSUMER PRICES NOT AN EASY CALL

 

Demand for higher-value beef cuts may be weakening as value-conscious consumers replace steak with more ground beef, Brown said, but it is also true that cow slaughter is down substantially, leaving tighter trimmings supplies, even with a jump in beef imports.

If supply is the primary driver, expect further push on cattle and beef prices as herd rebuilding tightens availability, he said.  If demand is having a bigger effect, prices could ease as consumers are more careful with their spending.

 

CATTLE, BEEF RECAP

 

The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $191.08 per cwt to $191.71, compared with last week’s range of $188.53 to $200.62 per cwt.  FOB dressed steers, and heifers went for $300.45 per cwt to $300.81, compared with $296.77 to $310.09.

The USDA choice cutout Monday was up $4.17 per cwt at $317.94 while select was up $2.89 at $300.06.  The choice/select spread widened to $17.88 from $16.60 with 73 loads of fabricated product and 20 loads of trimmings and grinds sold into the spot market.

The weighted average USDA listed wholesale price for fresh 90% lean beef was $373.61 per cwt, and 50% beef was $168.07.

The USDA said basis bids for corn from feeders in the Southern Plains were down $0.01 to $0.10 at $1.45 to $1.60 a bushel over the Sep corn contract, which settled at $3.90 3/4 a bushel, up $0.04 1/4.

The CME Feeder Cattle Index for the seven days ended Friday was $256.55 per cwt, down $1.17.  This compares with Monday’s Aug contract settlement of $244.00, down $5.65.