It looks as though demand for choice or prime beef is outstripping supply for the moment, but unless consumer demand has reached a new high, it may not last.
Consumer prices are rising faster than the 2015-2019 average, making it more likely that quality-eating beef may be priced out of the budgets of many consumers in coming months or years. Such thoughts may be especially meaningful in light of a declining cattle herd amid a savage drought in western and northern states.
CPI RISING FAST
The monthly Consumer Price Index from the US Bureau of Labor Statistics last week was up again and showed little sign of declining or even leveling out. The index for all items in July was 273.003, compared with 271.696 in June, 259.101 a year earlier and the 2015-2019 average of 246.529.
Last year’s CPI was well above the previous five-year average, even dipping a little in March and April. But the increase through the year was much more sedate than this year’s growth.
The CPI for meats also was sharply higher than average, coming in at 300.549 in the latest report. This compares with June’s 296.597, July 2020’s 283.826 and the previous five-year average of 256.770.
Last year, the CPI for meats jumped sharply from March into June and then fell off into September. This was linked to beef and pork shortages as packing plants were forced to curtail production because of employees being sick with COVID-19. Once production was restarted, it never quite caught up with consumer demand.
CONSUMERS WANT CHOICE
Unlike past decades when it was all the rage to avoid fat of any kind, modern consumers have rediscovered the flavor benefits of marbled beef. (They haven’t been offered marbled pork for many years.)
Because of this rediscovered love for marbled beef, consumers seem willing to pay for it. Beef packers have responded by searching out cattle that are fatter and more likely to produce choice carcasses.
Cattle producers also have stepped up their game by searching out and using the cattle genetics that will get them the cattle/carcasses they are being paid to produce.
Some say there aren’t enough choice-grading cattle coming for sale to packers as the choice/select spread widens unseasonably. And, there are reports that beef packers are picking over feedlot showlists for cattle that have the potential to yield choice grade carcasses.
Will it last?
CATTLE, BEEF RECAP
The USDA reported an average formula net live-basis price for all steers and heifers of $124.29 per cwt, and a formula dressed basis price of $197.67.
The USDA reported a formula base price for live FOB fed steers Wednesday of $125.01 per cwt and for FOB fed heifers of $122.21. FOB dressed steers went for $191.31, while FOB dressed heifers sold at $191.32.
The USDA choice cutout Wednesday was up $2.02 per cwt at $340.08, while select was up $3.03 at $309.80. The choice/select spread narrowed to $30.28 from $31.29 with 67 loads of fabricated product and 45 loads of trimmings and grinds sold into the spot market.
The USDA reported Wednesday that basis bids for corn from livestock feeding operations in the Southern Plains were steady to down $0.30 at $1.60 to $2.00 a bushel over the Sep futures and for southwest Kansas were unchanged at $0.70 over Sep, which settled at $5.61 3/4 a bushel, up $0.03 1/2.
Twenty-five steer and no heifer contracts were tendered for delivery Wednesday against the Aug live cattle contract. Twenty-five heifer contracts were retendered at one.
The CME Feeder Cattle Index for the seven days ended Tuesday was $155.24 per cwt up $0.33. This compares with Wednesday’s Aug contract settlement of $158.85 per cwt, up $2.27.