Meat Demand Still Looks Strong for Grilling Season
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Prime or Choice?

Sawyer says the hotel and retail trade still struggles from the impacts of Covid shutdowns. Prime beef is still a hallmark of steakhouses, but it will be pricier, which is why more restaurants are offering choice beef. Plus people may be purchasing prime beef at places like Costco or Sam’s Club to cook at home, using skills they learned in the pandemic.

People who are going out to eat are looking for meals they’re not going to make at home, which is why higher-end items still sell, but she’s also making sure chefs have affordable items on menus. 

“We have to educate those guests a little bit about the secondary pieces of meat that they may not have had a lot of experience with,” she says.

And there’s interest in grass-fed beef, even at a higher price point, she says. Servers also explain the differences between grass-fed and grain-finished beef for guests interested in trying it.

Trading Activity Strong; Mixed Outlook For Livestock Prices

Strong meat demand underscores increased trading activity in livestock products this year. As of June 30 year-to-date, average daily volume for feeder cattle futures is up 32% while live cattle futures saw a 10% increase. 

Makenzie Billings, Manager of Livestock Products at CME Group, says supply chain issues related to COVID and then droughts in cattle country caused ranchers to pull back on breeding. It takes roughly a  minimum of 15-16 months (ideally, 30-32 months) to raise cattle from birth to finishing, so it may be about two years before supplies normalize. She notes beef supplies may become increasingly tighter as the industry begins retaining heifers for breeding, which means feedlot placements could eventually decline. 

These factors have contributed to rising volatility in live cattle futures markets, according to the CME Group Volatility Index (CVOL), as well as increased trading in cattle options. Average daily volume in Feeder Cattle options up 67% and Live Cattle options is up 34% year-to-date. 

Beef eaters are unlikely to get much relief at the meat case, as live cattle futures values have been in a steady uptrend since mid-2022, with front-month futures prices up more than 20% through June 30. 

In June, 50% of respondents to the Purdue University/CME Group Ag Barometer said they expect “good times” for livestock producers in the next five years, up from 37% in May. Optimism about positive returns for cattle producers, especially cow-calf operations, drove the positive outlook.

Sterling Smith, director of research at AgriSompo, concurs that beef prices will stay elevated, and also points out that feed prices remain elevated relative to historical levels.

Feeder cattle values also suggest beef prices will remain stout, as feeder cattle future prices are up 25% year over year through June 30.

“We are most likely in a sustained bull market for cattle as long as the consumer is willing to pay up,” he says.

Smith says summer’s weather forecast is important to watch as parts of the Western U.S. are already dry, noting a drought stretches from Texas through Nebraska and into South Dakota. “This makes it hard for the grass-fed beef in Texas. You don’t have the grass, so that naturally tightens the supply,” he says.

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