Beef carcase starts to get ‘revalued’, following COVID-19 impact

 

Jon Condon, BEEF Central (Australia) 

March 20, 2020

 

COVID-19 is starting to exert heavy and unusual pressure on the value that can be extracted from any given beef carcase, as consumer behaviour continues to distort market demand for red meat in previously unseen ways.

 

Such is the pace of change in many markets at the moment that it is proving difficult to keep up with developments – even for stakeholders directly engaged in the international meat trade.

 

What is currently being seen in most key export and domestic markets is a fundamental re-shaping of the way beef consumers operate. Online sales of red meat, for example, have exploded in the past two weeks, to the point where many suppliers are struggling to keep up with delivery challenges.

 

The collapse in restaurant and other food service activity as consumers avoid public contact and travel has sharply impacted the higher-value loin cuts, commonly used for grilling.

 

Conversely, beef trim, knuckles and other lean secondary primals cheap enough to go into the grind have attracted sharply elevated demand.

 

As Beef Central wrote on Monday, mince has become the red-hot go-to item among consumers in many countries, looking to freeze-down and stockpile foods in preparation for enforced isolation. In contrast, nobody in their right mind wants to freeze down a more expensive premium tenderloin or sirloin steak.

 

Meat traders are deeply concerned about demand prospects for barbecue type loin meats in coming months, in the absence of a food service trade across large parts of Asia, North America and Australia.

 

One large wholesaler/portion cutter targeting the food service market has seen sales decline 40pc this week alone.

 

Most meat wholesalers dealing with restaurant and café clients work on credit, with the customer typically owing a month or two’s worth of inventory to their supplier. Wholesalers are getting increasingly edgy about what happens when restaurants and cafes start to go out of business, as they already are. That has potential to echo further up the chain, putting wholesalers, portioners and even meat processors under financial pressure.

 

“The direct impact of the virus is one thing, but what we all have to be careful of next is surviving the inevitable economic fall-out that follows,” a large processor contact said.

 

While these barbecue ‘sweet cuts’ represent around 17 percent of any carcase, they have a profound impact on carcase value given their premium $/kg price, and any normal market conditions.

 

However current meat trading conditions are anything but ‘normal.’ Tenderloins – typically the single highest priced item in any carcase breakdown – in some programs are said to be almost unsaleable this week. It is estimated that up to 90pc of tenderloins in many processors’ production runs go to the food service market. One trader suggested tenderloins have fallen 30pc in value in a week, and could ultimately drop by 40-50pc on values seen in early March.

 

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https://www.beefcentral.com/news/beef-carcase-starts-to-get-revalued-following-covid-19-impact/