The beef and cattle markets continue to set new records and boggle conventional wisdom.
The historic action of the wholesale and live beef markets during the past several weeks has been nothing short of remarkable. It’s difficult to grasp just how far these markets have moved in such a short period of time. While the absolute values of the markets are noteworthy, there’s an underlying dynamic at play that is also particularly important.
That is the relative contribution of the middle meats vs. the end meats to the cutout. I addressed this factor in a previous chart, but the recent sharp action in this area merits it a second look. For the first time in the cutout series, end meats have comprised over 50% of the Choice wholesale market, while middle meats fell to below 40%. Generally, when wholesale values escalate quickly, it’s the result of increased demand for middle meats.
However, in this instance, it appears that we’re bumping up against some price resistance. Therefore, buyers are looking to end meats to supply their customers in both retail and restaurant channels. Explained another way, perhaps prices have gotten so high that the relative value of the chuck and round are becoming far more attractive than the rib and loin cuts. Whatever the cause, it’s clear there are some new undercurrents within the wholesale market.
Granted, the market may settle this out quickly and we’ll look back one day and view this as an anomaly. Meanwhile, though, if prices stabilize well north of $200/cwt., this may become an important influence within the pricing structure. This becomes especially important as we look to the spring market.
As such, looking forward, how do you see this influencing the market? And what might this be signaling with respect to market dynamics and beef customers? Leave your thoughts below.
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