Wholesale Beef Prices Continue Spiking Higher
USDA’s Choice boxed beef cutout price surpassed $300 per cwt. on Tuesday, sustaining a rally that dates back to the first month of this year. The wholesale Choice price is more than $75 per cwt. higher than on March 15 (+33%) and second only to the record prices reached last year during the early weeks of the pandemic.
Unlike last year, however, domestic and export beef demand has risen steadily as the global economy reawakens.
“Different from a year ago the recent spike in wholesale beef prices is not due to a drastic reduction in supply,” Altin Kalo, senior economist at Steiner Consulting Group, wrote in the Daily Livestock Report.
Last week fed cattle slaughter was 516,000 head compared to 353,000 head a year ago. That leaves fed slaughter about 20,000 head smaller than the comparable week in 2019, but heavier cattle weights are helping offset some of the decline.
“Wholesale prices are up for all types of beef but demand appears to be more inelastic for high-quality beef products and export items,” Kalo wrote. “If you run a steakhouse, you can’t really replace that ribeye or filet on the menu with a tenderized round steak. Mother’s Day is around the corner and Choice tenderloin is a really hot commodity.”
The collapse in food service demand last May resulted in grocery stores selling whole tenderloins for $7.99 per pound. Now, the price of tenderloins at wholesale is $16 per pound, a new record.
“The value of the loin primal Monday night was $451 per cwt, up 49% since mid-March while rib primal value during this period is up almost 39%,” Kalo said. “The price gains for middle meats have accounted for about 2/3 of the overall increase in the value of the cutout. Restaurants are back in business and they are having to pay through the nose as spot supply remains limited. Retailers were quite aggressive in booking product for Pre-Memorial and Memorial Day needs back in March.”
Packers sold 5,556 loads of beef for delivery 22 to 60 days ahead during the five weeks ending April2. That was 1,400 truckloads (+34%) more than the same five-week period in 2019, and 1,300 loads more than 2018.
“The combination of the marginal reduction in fed cattle slaughter, the higher share of product booked and extra efforts needed to refill the pipeline have contributed to rampant price inflation in the near term,” Kalo said. “However, current high prices will impact retail features come June and July. Forward beef sales for 22-day window are down about 900 loads in the last three weeks and we think they will be down again next week.”
Some observers believe beef prices are sharply because consumers have more money and are splurging on high value beef.
“But the USDA retail feature report tells a more nuanced story,” Kalo said. “Retailers are featuring more ground beef and at prices that are lower than they were both in 2020 and 2019. The weekly retail ground beef activity index (ground beef ads at retail stores surveyed) has steadily increased since early April. In the four weeks ending April 30, it averaged 232% over last year, 20% higher than in 2019 and 45% higher than the five-year average. Prices for those ground beef features were substantially lower than last year but also lower than in 2019.”
