Is inflation starting to eat into beef retail and wholesale markets beyond anecdotal observations? A graph of choice boxed-beef cutout values might say so.
The graph also could show positively that federal government stimulus checks last year created, or allowed, unusual buying interest at the retail level. It’s hard to say that more money made for more actual demand, but people with money to spend were buying more and better beef products, leading to more sales of choice and prime beef.
THIS YEAR IS DIFFERENT
But this year is as different from last year as last year was to the previous five-year average. There have been no government giveaways this year, and inflation is digging into the pocketbooks of everyone, leading to more studied purchases, including some substitutions.
It sometimes takes a while, but eventually markets will react to changes at the retail level. The year began with economic optimism just beginning to wane, and as it became clearer that prices of everything were going up, it dawned on shoppers that prime or choice beef had no place in their shopping carts anymore.
It’s clear from the graph that wholesale beef markets also have lost their luster. One market analyst said the beef producing industry has lost pricing leverage. Consumers can’t pay what they were and are buying less or shifting to competing proteins.
Oklahoma State University Livestock Marketing Specialist Derrell Peel said in a newsletter that pork and chicken markets were supporting retail beef prices. This may not last for a long time, though. Production adjustments can be made by chicken growers quickly, especially if it becomes apparent that cash-strapped shoppers are shifting to cheaper proteins.
In fact, meat market analysts have said for years that beef competes more with chicken for consumer dollars than it does with pork. Shoppers will eat a certain level of pork products regardless of the comparative price of beef, but they will switch between beef and chicken quite readily.
GOING FORWARD
It seems evident that without a major event, consumers will continue pulling back on beef purchases. There is only one major holiday left before the heat of the summer squelches intense grilling interest, and much of the retail buying for the Independence Day holiday may already be done.
It’s a long haul between July 4 and the Labor Day holiday, and there is no inflation relief on the horizon.
The analyst said beef packer margins, which have been unusually wide for a year, will fade quickly in the face of ongoing inflation and consumer hesitancy over beef prices. Similar forecasts by packer economists may be behind current slaughter rates.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $140.00 to $147.09 per cwt, compared with last week’s range of $135.00 to $144.00. FOB dressed steers, and heifers went for $216.47 to $220.44 per cwt, versus $213.01 to $219.19.
The USDA choice cutout Wednesday was down $0.99 per cwt at $266.57, while select was down $0.71 at $245.99. The choice/select spread narrowed to $20.58 from $20.86 with 129 loads of fabricated product and 28 loads of trimmings and grinds sold into the spot market.
The USDA reported that basis bids for corn from feeders in the Southern Plains were unchanged at $1.90 to $2.00 a bushel over the Jul futures and for southwest Kansas were steady at even the Jul, which settled at $7.68 a bushel, up $0.07 1/4.
Twenty-five heifer delivery intentions were retendered and demanded at one on Wednesday.
The CME Feeder Cattle Index for the seven days ended Tuesday was $165.21 per cwt up $0.18. This compares with Wednesday’s Aug contract settlement of $173.15, down $2.15.