Beef prices rise through July amid good demand, supply may moderate prices

by Kim Souza (ksouza@talkbusiness.net) 306 views 

Arkansas cattle farmers are hoping a slight rebound in beef prices becomes a trend. All fresh beef prices at retail rose to $5.83 per pound last month, up 1% from a year ago.

Choice grade beef prices were $6.10 per pound in July, slightly higher year-over-year, but down from $6.20 per pound in June, according to report from Derrell Peel, extension livestock marketing specialist at Oklahoma State University.

While retail beef prices remain lofty compared to chicken and pork prices, Peel said all three meat proteins cost well above their historical levels prior to 2014. While prices at retail remain high, wholesale beef cutout values continue to drop as the summer heat lingers across the major cattle producing states. Peel said Choice grade beef cutout values averaged $197.66 per hundredweight in mid-August down from its seasonal peak of $250.86 per hundredweight in mid-June.

“Choice beef prices have struggled to find a summer bottom with ample supplies and summer heat weighing on beef markets. Weekly Choice cutout values averaged higher year over year from late April until last week,” Peel said.

Select grade cutout values also increased from January to a weekly seasonal peak of $224.54 per hundredweight in mid-May before dropping to last week’s $194.81. Peel said the Choice-Select spread has widened dramatically this year from a seasonal low of $1.25 per hundredweight in mid-February peaking at $30.38 per hundredweight by the second week of June.

“This was the highest weekly Choice-Select spread since the BSE-induced market turbulence in October, 2003. The Choice-Select spread has decreased back to a narrow $2.25 per hundredweight range in mid-August,” Peel said.

Select is is the lower of three grades given to beef with Choice being the mid-grade and Prime being the highest quality rating based on marbling, tenderness and flavor. Peel said there has been a larger demand for Choice grade beef, namely chuck and ground round used in burgers which have sent those prices higher in recent weeks, pushing above record highs in recent years.

“The ground beef market has been quite volatile this year with 50% lean fed trimmings exhibiting an unusual and pronounced spike in May before returning to year ago levels recently. Lean (90%) trimmings followed year earlier levels through late April before rising sharply higher year over year for the past several weeks,” Peel said.

He said beef rib and loin values have weakened through the summer months and Choice Ribeye values peaked in June, pulling back in recent weeks.

As more beef comes on the market with higher cattle numbers in the pipeline agronomists expect beef prices to moderate. Opening export markets in China will take up some of the supply albeit limited. Peel expects beef exports will rise about 7% this year.

Retailers are also featuring beef more given the better margins they have seen in recent months against lower wholesale cutout values. Beef consumption rose to 55.6 pound per person last year, up 15% from a decade earlier, according to the U.S. Department of Agriculture. Peel said per capita retail beef consumption is projected to increase less than 1% to 55.9 pounds this year. He said while cattle slaughter is up 6%, lower carcass weights have kept production totals to a 4% increase year-over-year.

Between 2006 and 2016 beef prices jumped 50% as live cattle numbers slowly recovered from record lows.

Agronomists say the stronger economy is helping put more beef purchases in the weekly grocery cart even though prices are a bit higher than chicken and pork. With chicken companies like Tyson Foods offering more value-added, higher-margin chicken products in the meat case chicken consumers can pay upwards of $4.70 per pound for boneless, skinless marinated breast meat. Commodity grade chicken runs about $3.34 per pound. This compares to a one-pound chub of ground beef (85% lean) selling for roughly $4.24 at Wal-Mart.

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