Wholesale Beef Price Roller Coaster Could Continue
Wholesale beef prices have fallen 18% since the pre-Labor Day peak on August 23.
The decline in the value of middle meats has had the largest impact on that price decline, says Len Steiner, Steiner Group Consulting.
“Half of the decline in the value of the choice beef cutout since August has been due to a decline in the value of middle meats,” Steiner says. “The rib primal during this period has declined $72.30 per cwt. or 12.1%, with much of this decline taking place in the last few days.”
Further, the loin primal has declined $100.80 per cwt. or 22.7% during this period, contributing more than one third of the overall drop in wholesale beef prices.
“It is not unusual for loin primal values to decline after Labor Day and this year has been no different,” Steiner says. “For now, the loin primal is largely tracking with 2020 and 2019, albeit at a higher price point.”
Analysts are debating the value of the Choice cutout come late October and November. The question is whether the spike in retail and foodservice prices significantly impacted the quantity demanded, causing spot supplies to start to back up and forcing packers to discount prices?
“So far the evidence for this is quite modest. It appears that packers indeed have more product available to sell spot, hence the softer wholesale trend,” Steiner says.
USDA reported packers sold 400 loads of choice beef in the spot market last week. This compares to 393 last year and 288 in 2019, and it was the highest number of spot loads for this time of year since 2015.
“The spot supply of ground beef and trim remains limited, suggesting that end users may have shifted to less expensive products after Labor Day. But the increase in spot availability may prove to be limited,” Steiner says.
USDA reported that during the four August weeks, packers sold an average of 724 loads per week for delivery 22-60 days out. This was far lower than the 1120 loads per week sold during this period in 2020 and 993 loads per week in August 2019.
“Clearly retailers slowed down forward buying in August, which means fewer features in September and October and more product available in the spot market. That’s what we are seeing now. But forward buying has picked up in the last few weeks,” Steiner says.
In the four weeks ending October 1, beef sales for delivery 22-60 days out averaged 1025 loads per week, far higher than in August. This volume was under the 1085 load per week average last year but far higher than in 2018 or 2019.
“If there is one thing we have seen this year is that production bottlenecks have served to amplify the effect of seasonal demand. This was the case in May and then in August,” Steiner says. “It would not be unreasonable to expect the roller coaster to continue into the year-end holidays.”
