If Beef's For Dinner This Summer, It Might Not Be Steak
Hello Pro Farmer Members!
Memorial Day is the "official" start to the summer grilling season, a critical demand period for the livestock and poultry markets. Heading into the grilling season, total red meat and poultry stocks stand at 2.347 billion pounds. While that was down 47 million lbs. (2.0%) from year-ago, suggesting demand is slowly cutting into the hefty supplies, there's a lot of meat in commercial storage. Frozen beef and pork stocks are under year-ago levels, but still well above 2014 inventories. Poultry stocks continue to run well above year-ago and are the most burdensome.
The demand side of the market during grilling season is likely to be driven by price. For beef (and veal), USDA says prices declined 0.2% from March to April and are now 5.6% lower than this time last year. USDA now forecasts overall beef and veal prices will decrease 2% to 3% this year, compared to its prior outlook calling for a 1% to 2% decline. But just looking at the overall beef price doesn't tell the whole story. The Labor Department reports average retail ground beef prices are at their lowest level in two years, down 9.8% from April 2015. But retail steak prices are up 0.9% from last year.
USDA’s pork price outlook calls for a 0.5% decrease to a 0.5% increase. The Labor Department shows grocery-level chop prices are down 2.3% from April 2015.
USDA forecasts poultry prices will hold steady to increase 1.0% in 2016 compared to its April forecast for a 1% to 2% rise. The Labor Department reports retail boneless, skinless chicken breast prices in April were down 7.2% from last year.
The Labor Department data suggests if consumers opt for beef this summer, they are likely to favor ground beef over steak. The year-over-year rise in retail steak prices means consumers may also opt for pork chops and chicken breasts when buying muscle cuts. That's not a good sign for beef demand as it's hard for ground beef to carry the load through the grilling season. Without a pickup in steak demand, it will be difficult for wholesale beef prices to appreciate significantly, which would limit the ability of futures and the cash cattle market to rebound. Retailers’ unwillingness to lower steak prices continues to hurt beef demand.
That's it for now...
... have a great weekend!
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