Beef demand is up ahead of the holidays
by November 4, 2019 2:03 pm 419 views
While demand for beef typically wanes after Labor Day that has not been the case this year. Boxed beef prices increased 10% since early October, according to Derrell Peel, a beef marketing analyst at Oklahoma State University. He said the increase was significantly higher than the normal seasonal bump of less than 2% from October to November.
The “Choice” boxed beef cutout is up nearly 7% year over year. In total, beef demand is made up of many different beef products which have very distinct seasonal price patterns, Peel said.
He said not all cuts of beef prices are rising with wholesale strip loin falling about 6% in the past month. Peel said prices are still up from a year ago.
“Another part of the loin, the tenderloin, has a very different seasonal price pattern,” Peel said. “Colder weather into the end of the year typically supports restaurant steak demand resulting in higher tenderloin prices through the fourth quarter of the year. This fall, wholesale tenderloin prices increased faster and more dramatically than usual, jumping by 38% in October. Overall loin primal prices increased over 11% in the past month and are currently up 10% year over year.”.
Other cuts such as ribeye typically have a sharp and pronounced seasonal peak in November based on holiday demand for prime rib. This year the price increase started early with October wholesale ribeye prices jumping over 18% in the past month. Wholesale Choice ribeye prices touched $10 a pound last week, the first time since mid-2017, Peel said. Rib primal prices have increased by nearly 13% in the past month and are currently 4% higher year over year.
He said chuck and round products usually increase in the early fall with more roasts and stews being consumed at this time of year. October was a mixed bag for chuck products with shoulder clod prices higher despite lower top blade (source of Flat Iron steaks) prices, he said.
Several chuck products have become very popular export items and seasonal patterns for these cuts have been changing in recent years, Peel explained. Demand for the clod (Petite) tender continues very strong with prices up over 25% in the past month. Wholesale chuck roll prices were higher seasonally; up 12% in the past month. Overall, he said chuck values were up over 7% in the past month and are nearly 6% higher year over year.
Round products displayed similar variability with top round and outside rounds moving higher in October and bottom round and eye of round prices lower, Peel said. Wholesale round primal values moved nearly 5% higher in October and are currently about 4% higher year over year.
Peel said Choice cut grading percentages have been lower since late May and that is impacting the wholesale beef market on the supply side.
“The reduction in Choice beef supply relative to Select has resulted in a counter-seasonally high Choice-Select price spread since the summer. Strong demand and tighter Choice beef supplies both are contributing to sharply higher Choice beef product prices in the fourth quarter,” Peel said.
Higher beef prices are a plus for Tyson Foods, the nation’s largest beef packer that will report its fourth quarter and fiscal 2019 earnings on Nov. 12. Shares of Tyson Foods (NYSE: TSN) traded lower on Monday (Nov. 4) with shares down $1.39 at $82.32 in the morning session. Tyson Foods shares are up 53% year to date, despite being down today.
Beef packers averaged around $300 per hundredweight during the month of October, up about 35% from a year ago, according to Sterling Marketing Beef Profit Tracker.