Kay’s Cuts: Beef is king of the US meat case


Steve Kay, Opinion, BEEF Central (Australia)

December 2, 2019


A monthly column written for Beef Central by US meat and livestock industry commentator, Steve Kay, publisher of US Cattle Buyers Weekly


BEEF has returned to its long-held role as king of the meat case in American grocery stores, due in no small part to the efforts of seedstock and cow-calf producers over the past 25 years.


Back in the mid-1990s, beef was not delivering for consumers largely due to inconsistency, and the US industry set out to change that.


Years of careful genetic selection and an upgrading of the beef cow herd followed. Ironically, devastating drought in the US from 2010 through 2012 hastened the latter, as ranchers culled their oldest and most inefficient cows. The result was a beef cow herd that was younger and better-performing than for many years.


The drought also substantially reduced herd size, overall cattle numbers and annual beef production. So it was no surprise that domestic beef demand (average price versus volume sold) peaked in 2015. What is more important is that as cattle numbers and production increased again, beef demand remained strong, although just below its 2015 peak.


This was true again in 2019 when beef – week-in, and week-out – has easily been the preferred protein for American food shoppers. Whether it was in a conventional supermarket or at a membership warehouse, beef dominated sales of pork and chicken, even though there were ample supplies of these other proteins.


The reason for this is multi-faceted but in a nutshell, 2019 has seen a happy convergence of the highest-quality beef supply in the US industry’s history at exactly the same time that more consumers can afford it.


Cattle are now grading 80pc or higher USDA Prime and Choice and less than 18pc Select. Just five years, ago the percentages were under 70pc Prime and Choice and 25pc Select.


The greater supply of Prime and Choice beef allowed many retailers to upgrade their beef programs, especially when they realised their customers had more money to spend on beef. The latter is a result of a solid US, economy, a declining unemployment rate and most notably an increase in hourly wages. The last point has meant that American who previously could only afford to buy ground (minced) beef or a pot roast regularly can now afford to buy a T-bone steak whenever they want to.


Strong domestic and export demand for beef in October was the main reason why cash live (grainfed) cattle prices at the end of the month finally exceeded the levels they had been at the week of an August 9 fire at Tyson Foods’ Holcomb, Kansas, beef plant, which closed the plant.


The plant is due to resume slaughter operations this week. November beef sales remained solid, despite the usual plethora of cheap turkey for the Thanksgiving holiday, and December holiday beef sales might be the strongest in some years.


A new analysis from the Livestock Marketing Information Centre confirms the strength of US beef demand in recent years. Third quarter beef demand posted year-over-year gains in the Meat Demand Index that LMIC calculates, it says. The index is a measure of changes in domestic consumer demand. Retail beef demand, measured by USDA’s retail All Fresh beef price, increased less than 1pc over last year, it says.


Retail beef demand is currently in an up-cycle after 2008-2013 showed values below 100, says LMIC. Since 2014, the index for the third quarter has ranged from 102 to 110, with 2019 being the highest since 2015.


Annual retail beef demand has been trending smaller than the last peak of 2015, reading values of 108 and 107 in 2016, 2017, and 2018. This year, the annual index should show a slightly higher figure based on the first three quarters, says LMIC.


LMIC’s calculation of its demand index does not take into account that retailers have priced beef aggressively all year, with a lid on everyday prices and plenty of featured items each week. The result is that the All Fresh price has been close to year earlier levels. For example, the October price averaged US $5.77 per pound, up 1.6pc on a year ago but down three cents from September.


Retailers could have offered beef at higher prices, which would have raised LMIC’s demand index. Instead, they chose to keep prices almost flat with last year and sell even more beef. That has been great news for beef-loving Americans. With beef production expected to increase 2pc in 2020 from 2019, retailers will continue to price beef aggressively and consumers will benefit even more.


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