Source: John D. Anderson, Deputy Chief Economist, American Farm Bureau Federation
After bouncing around mostly between $185 and $195 per hundredweight (cwt) since the end of summer last year, wholesale beef prices earlier this month finally moved into record territory above the $200 mark. Last Thursday, the Choice cutout value reached $211.37 before slipping back below $209 on Friday. For the week, the Choice cutout worked out to $210.47, up $2.98 from the prior week. The cutout value has been led higher by strong prices on middle meats. As of last Friday, the Choice cutout stood at $208.87, up $9.38 from its price at the beginning of the month. Over that period of time, rib and loin primal values increased by $29.52 and $28.36, respectively. By contrast, chuck and round primal values were basically unchanged during that time.
The strength in the boxed beef cutout in May was likely supported to a great extent by retailer purchases in advance of the Memorial Day holiday. The outsized performance of middle meat prices lends credence to this notion. These are the cuts whose highest and best use is on the grill; and Memorial Day is definitely a grilling holiday. One might hope that this year’s generally poor spring weather (too cool and too wet in many parts of the country) has contributed to a pent-up demand for grilling that was finally satiated this past long weekend. No doubt retailers have already assessed the post-holiday condition of their meat cases. Whether or not they are happy with the holiday movement of beef will have a lot to do with where wholesale prices head from here.
Another factor that will be key to the future direct of wholesale beef prices is the performance of competing meat prices. Those have been very supportive of late. For example, after being flat for just about all of 2012, boneless/skinless chicken breast prices have recently surged, climbing to over 200 cents/pound last week from around 150 cents per pound in mid-April. This is the highest b/s breast price since about this same time of year in 2004, when prices briefly climbed into the mid-200s. At that time, though, prices on other cuts were such that the 12-city broiler composite never exceeded 85 cents per pound. By contrast, last week’s national broiler composite (successor to the now-discontinued 12-city price series) worked out to 113.53 cents per pound, reflecting dark meat and wing prices that are far above 2004 levels. Wholesale pork prices have also managed to move up along with the competition. The pork cutout finished the week last week at $94.42 / cwt (FOB plant). As recently at early-April, the pork cutout was struggling to get above $80.