Why Livestock and Meat Have Followed Different Pricing Patterns

By Jim Sullivan

At a Glance

Live cattle and lean hog prices bottomed in the early days of the pandemic, while prices for meat at the grocery store spiked

New pricing tools for the pork cutout and boxed beef aim to help align meat and livestock markets

With their favorite restaurants closed last year, Americans snapped up steaks, burgers, and pork chops to cook and serve at home. This reinforced what has been known for a long time: Americans want their meat whether they’re dining out or at home.

That’s not to say 2020 was easy for those involved in the meat trade. Everyone from the livestock producer to the retail grocer endured unprecedented turbulence. CME live cattle futures tumbled and touched a 14-year low at 76 cents a pound in April 2020. Similarly, CME lean hog futures also bottomed out at 37 cents a pound in April 2020, touching a price level not seen since 2002.

Meanwhile, wholesale beef and pork prices went the opposite direction. The boxed beef cutout surged to a new all-time high above $475 per hundred weight (cwt) and the pork cutout notched a high of $117 cwt in May. The pandemic and its resulting supply chain disruptions presented the most extreme example of how the prices for hogs and cattle and those of beef and pork may at times follow similar patterns, but they are not at all the same.

Lean hogs and pork cutout pricing are not always connected.

Live cattle and boxed beef pricing went in different directions during the pandemic

Supply and demand patterns of recent years underscore the need for additional pricing tools. That’s the rationale behind CME Group’s Pork Cutout futures and options that first launched in November 2020. Since launch, Pork Cutout has attracted active daily trade and open interest in every contract month out through February of 2022.

Additionally, CME began publishing the new Boxed Beef Index, which tracks the prices paid for beef. Just as the Pork Cutout Index was created in 2015 to provide a new pricing tool for the marketplace, there is hope that Boxed Beef can evolve to become the benchmark price reference for beef.

About the presenter

Jim Sullivan, Director of Commodity Research and Product Development, CME Group

Jim Sullivan, Director of Commodity Research and Product Development, focuses on livestock and dairy markets as a member of the CME Agricultural team. Jim has been in the futures and derivatives industry since 2004 and was a trader before joining the Exchange in 2010. He is based in Chicago.

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