Last minute retail meat buying for the Memorial Day Holiday has begun.\r\n Most of the expected holiday beef needs have already been booked. Retail meat buyers will wait, however, to lock in the last of their anticipated needs based on recent sales and their feel of how much they can sell over the holiday.\r\n The USDA’s daily beef cutout values were up sharply Tuesday after mincing around Monday and Tuesday. Choice beef was up $2.79 per cwt at $226.61, and select was up $2.89 at $215.53. \r\n The choice/select spread narrowed slightly to $11.08, and there were 131 loads sold into the spot market, versus just 69 on Monday.\r\n Tuesday’s gains in the cutout came on moderate to good demand for all major carcass primal sections. Prices for ribs and rounds were steady to firm while chucks and loins were called firm to higher. Trimmings were steady on light-to-moderate demand and offerings.\r\n The lack of activity in the trimmings and grind markets may mean that the end cuts being sold Tuesday will find their way to the grinders or that much of this demand has been booked since it is likely to be more constant from year to year, and end cuts can be repurposed into ground beef in-store.\r\n But looking at price alone can be a little deceptive. Part of the gains in boxed-beef prices likely can be linked to a slight reduction in slaughter. The USDA reports weekly slaughter through Tuesday at 235,000 head, down 1.67% from 239,000 a week earlier and 4.86% below a year earlier. \r\n And slaughter last week, at 597,000 head, was down 1.81% from the prior week’s 608,000. \r\n Beef production last week was estimated at 471.6 million pounds, down 1.87% from 480.6 million last week and down 3.74% from 489.9 million last year. \r\n The reduction in beef output was all on slaughter since dressed weights the last two weeks have been steady at 792 pounds, and they are up from 780 pounds last year.\r\n\r\nRETAILERS WORRY ABOUT DEMAND\r\n\r\n But retail grocers are concerned about beef demand as meat-counter prices are forced to record-high levels. Chicken, especially chicken wings, seem like the food of the future, and much of the demand seems to be centered on price.\r\n Grocers are concerned because they would rather sell beef than chicken. Even though the per-pound profit may be greater on the chicken, the cash flow and gross income is better on the beef. And when meat-department managers get their bonuses based on income, beef is king.\r\n Chicken also takes more store labor than beef for the amount of income generated. Twenty packages of chicken take up the same cooler space as 20 packages of beef, but as chicken sells more packages because of price, the display case must be monitored and replenished more often. \r\n Beef prices now are challenging the known upper limits of consumer acceptance. And with continued drought withering pasture lands, and the long lag time it takes to rebuild the herd, it’s safe to assume consumer pocketbooks will be challenged for some time to come.\r\n So far, consumers have hung with the industry. Perhaps because pork and chicken prices also have risen or because consumers really like beef and are willing to pay for it.\r\n An Oklahoma State University index of consumers’ willingness to pay showed steak at 97.7% of a year earlier and hamburger at 99.1%. Chicken breast came in at 98.9% and pork chops at 96.1%. Chicken wings jumped to 109.4%, and deli ham rose to 106%. \r\n All that just makes retailers nervous.\r\n\r\nIN OUR OPINION\r\n\r\n–A recent FSIS audit of Brazil’s meat inspection system showed some serious deficiencies in government oversight of plant food safety issues. US industry associations likely will keep up the pressure to bar any more Brazilian beef facilities from exporting to the US.\r\n–Cash cattle prices this week may hold firm or even rise if beef markets maintain Tuesday’s pace, but could soften beginning next week.\r\n–Once cattle markets begin to soften, the funds’ large long positions could bring on a liquidation feeding frenzy that could take cash and futures prices below equilibrium by mid-summer.\r\n
Cattle feeding is pretty straightforward - doing it profitably isn't.