As cattle producers and beef packers deal with various trade restrictions, a late winter, flooding and a disrupted corn planting season, it looks like the cool, wet weather also has diminished beef consumption.
It’s impossible to say that beef “demand” has been hampered, but the flow of beef through retail grocery and restaurant outlets, or “consumption,” certainly seems to have been cut.
Demand is the willingness of consumers to pay more for the same amount of the same product or to pay the same amount to get less. Many economists will say it’s impossible to measure demand for a product like beef over a short time span because there are too many variables.
BEEF CUTOUT DOWN
However, it looks like something over the last couple of months has hurt beef consumption because wholesale prices, as measured by the USDA’s weekly average beef cutout value, have declined earlier than usual and continue on a bearish path.
The weekly average boxed beef cutout value has a strong seasonal peak in late spring. After a long winter, US consumers like to get outside and grill meat. The presence of the Memorial Day holiday, Mother’s Day and Father’s Day observations and the Independence Day holiday give people good excuses to do just that.
After Independence Day on July 4, however, the hot summer months sap much of the grilling enthusiasm until the Labor Day holiday in September.
As a result, the throughput of beef through retail channels tends to wane, and wholesale pricing tends to decline in advance as retail and restaurant meat buyers fill their advance orders and back away.
Over the five-year period from 2013 through 2017, the average date for that peak was about the third week of May at $234.02 per cwt, according to data from the USDA’s Agricultural Marketing Service and compiled by the Livestock Marketing Information Center. Last year, the peak came right on time at $231.94 per cwt.
This year, though, the peak occurred much earlier, apparently as buyers filled their expected needs earlier. This year, the peak came about the last week of April at $233.49 per cwt.
That the cutout last week was close to a year earlier is moot since the trend clearly is down, an analyst said.
NOT BECAUSE OF LARGER SUPPLIES
Some might say that the beef cutout also can be pressured by too much supply, but apparently not in this case, the analyst said.
It is true that US exports have been hampered this year, being down about 4% through April, the USDA said. It’s also true that beef production has been about steady being up only 0.1% for the year.
However, frozen beef supplies on April 30 were down 9% from a year earlier.
So, if production is stable, exports are down, yet cold storage stocks are down, it seems the pressure on beef prices is coming from lowered buying interest.
CATTLE, BEEF RECAP
Cash cattle trading took place last week at $112 to $114 per cwt on a live basis, steady with the previous week’s action, and at $184 to $186 dressed, steady to up $2.
The USDA choice cutout Monday was down $0.41 per cwt at $221.82, while select was down $0.25 at $202.51. The choice/select spread narrowed to $19.31 from $19.42 with 70 loads of fabricated product sold into the spot market.
No contract delivery notices were served for the Jun live cattle futures contract Monday.
The CME Feeder Cattle index for the seven days ended Friday was $133.55 per cwt, down $0.70 from the previous day. This compares with Monday’s Aug contract settlement of $136.92, up $1.40.