Heading into this week there should be both caution and optimism.

Optimism comes with the record-high fed cattle prices paid last week, as well as the strengthening boxed beef cutout values and cattle futures rally heading into Friday.

There’s also optimism around the nation’s economy.

Federal Reserve Chairman Ben Bernanke presented the semiannual Monetary Report to Congress last week.

“The recovery of the U.S. economy continues, but the pace of expansion has been uneven and modest by historical standards…” Bernanke explained. “…The decline in the unemployment rate over the past year has been somewhat more rapid than might have been expected, given that the economy appears to have been growing during that time frame at or below its longer-term trend; continued improvement in the job market is likely to require stronger growth in final demand and production.”

Though major financial indices lost a little ground Friday, the Dow Jones Industrial Average closed above 13,000 during the week for the first time since the financial crisis began in 2008. The NASDAQ closed during the week above 3,000 for the first time since the dot com bubble in 2000. Perhaps more important, the S&P 500 has traded above 1,350 for more than two weeks.

On the other hand, mild weather and the need to dilute costs with as many pounds as reasonably possible continues ratcheting carcass weights above those of last year. And, there’s increased concern over how much higher retail beef prices can go before consumers throw a shoe.

Market analysts with the Texas Cattle Feeders Association (TCFA) pointed out Friday that last week’s comprehensive cutout was the highest since the report was available in 2002.

“The spot beef market is currently trading at a premium to the comprehensive cutout,” TCFA analysts explain. “This has historically been a negative sign, showing the retailers’ unwillingness to purchase product at these price levels. Comments from market analysts about the retail beef market this week have noted significant price resistance to Choice cutout trading near the $200 level, with fear that this level could negatively affect beef features going into the peak grilling season.”

According to the seventh annual Power of Meat study released last week, price has taken on an ever-greater role in the meat purchasing decision process, as price per pound has solidified its number-one ranking as the most important decision factor for consumers, while total package cost is now the second most important decision factor, surpassing product appearance.

The study, conducted by 210 Analytics, was commissioned jointly by the American Meat Institute and the Food Marketing Institute. The report details the findings of a national online poll of 1,340 consumers conducted in November 2011.

In terms of meat and poultry, the Power of Meat study says dollar sales increased by 2.5%, but volume sales decreased by 5.3% as a result of inflation across proteins. Researchers say consumer focus on price and value is further underscored by the growing share of shoppers engaging in pre-trip research and planning meals around promotions. However, they say an even greater share compares prices while in the store. The end result is greater shopper flexibility to adjust purchases to spend less.

As Nevil Speer at Western Kentucky University explains in his March Monthly Market Profile, “From strictly a market perspective, February’s market surge shouldn’t be interpreted as an 'all-clear' signal. Much of it stemmed from slowing chain speed to create some room for margin; cattle feeders failed to exploit that strategy and gave all the benefit back to the packer. That just prolongs the string of bad weeks. It hasn’t happened yet, but at some point the packer has to push back. It will likely begin if or when downstream buyers abstain because of higher prices. That could prove very disruptive to the market.”

You can find Speer’s Monthly Market Profile on the first Friday of every month in BEEF Cow-Calf Weekly. Check out yesterday's column here.