Partially explaining the strength in US beef demand, data show the US economy posted its first year over year gain in the first quarter of 2021 after three straight quarters of year-on-year decline, the Livestock Marketing Information Center said in a letter to Extension agents called In The Cattle Markets.
That indicated the US was on the path to economic recovery, and healthy economies often mean upgraded diets, a market analyst said. Unemployment, too, has declined and fell to less than 6% in the second quarter.
“We are only just beginning to see policy changes that imply the US is back on track from a Federal Reserve policy standpoint,” the LMIC said. “The Federal Open Market Committee meeting at the end of July indicated the US was not completely out of the woods yet.”
SHARP RISE IN DISPOSABLE INCOME, SAVINGS
Some more statistics released in the first half of 2021 show a sharp rise in disposable income, that in chained dollars (2012) and current dollars hit an all-time high, the LMIC said.
In current dollars the first quarter of 2021 outpaced the previous peak by 8%, the LMIC said. What’s more, these dollars appeared to be making their way into savings accounts as opposed to being spent and churning economic activity.
Savings relative to personal disposable income jumped back above 20%, the highest level since the second quarter of 2020, when the savings rate was more than 25%, the LMIC said.
That savings rate may be counterintuitive to the increasing consumer confidence that has taken place since early 2020, the LMIC said, but the outlook from consumers appeared to be optimistic and only recently took a rather sharp decline that may be linked to the Delta variant of COVID.
Still, the high savings rate of first quarter 2021 likely was linked to those concerns, the LMIC said.
CONSUMERS NOT SHY ABOUT MEAT
As it relates to food dollars spent, retail prices have climbed for beef, chicken and pork. However, given the rise in disposable income, consumers may not shy away from higher meat prices as quickly as they may have in the past, the LMIC said.
From an economic perspective, higher consumption levels tend to fuel the economy. Data shows that back to 1947 savings rates jumped above 10% in only 20 quarters, and the highest was 12.5% in 1975, prior to 2020. The smallest quarterly savings rate since first quarter 2020 has been 13.6%.
Prior to 2020, the primary driver of personal income was wages and salary, the LMIC said. But starting in the second quarter of 2020, unprecedented government payments were the primary drivers in disposable income trends.
CATTLE, BEEF RECAP
Fed cattle traded this week at $120 to $125 per cwt, up $1 to $2 from last week. Dressed-basis trades were done at $197 per cwt, up $1 to $2.
The USDA choice cutout Tuesday was up $4.84 per cwt at $285.84, while select was up $4.11 at $267.49. The choice/select spread widened to $18.35 from $17.62 with 91 loads of fabricated product and 39 loads of trimmings and grinds sold into the spot market.
The USDA reported Tuesday that basis bids for corn from livestock feeding operations in the Southern Plains were unchanged at $1.86 to $1.91 a bushel over the Sep futures and for southwest Kansas were unchanged at $0.70 over Sep, which settled at $5.50 1/2 a bushel, down $0.08 1/4.
The CME Feeder Cattle Index for the seven days ended Monday was $156.15 per cwt up $0.57. This compares with Tuesday’s Aug contract settlement of $158.90 per cwt, up $0.65.