Cattle and beef market dynamics in the past year were nothing if not volatile, and in some ways, unprecedented. Wholesale and retail beef prices occupy a space near the top of the list for a record-setting year. The brief period in May 2020 should hopefully hold the record one-time cutout price for a very long time. But the sustained higher price plateau of 2021 proved that beef inflation would not wane. The past year’s comprehensive boxed beef price came in 18% higher than the prior year, even though the priciest week of 2021 was 21% shy of the May 2020 high.
Supply chain imbalances and processing sector issues have been the focal point of beef price inflation in the past two years. Processing concerns have garnered attention from the President, prompting an announcement last Monday to provide financial aid to bolster the packing
sector – which deserves heavy consideration and is impactful to the future of the beef business.
But let’s shift focus to what has been working well and what our consumers are voting for with their dollars.
It’s counterintuitive to an amateur economic mind that customers will react to record high beef prices by paying a larger premium for the highest quality. As we’ve said so many times before, they are doing so also in spite of the fact that the quality mix is as rich as it’s ever been, with high-quality carcasses in the premium Choice (CAB) and Prime (including CAB Prime) categories.
Sales volume and price combined create the demand story. In 2021, demand was firmly higher for the more premium grade and premium branded products (like CAB). Starting with USDA Choice, the year brought on a two-fold increase in the Choice/Select spread, jumping from $8.75/cwt. in 2020 to $16.44/cwt. in 2021. Recent volatility suggests looking further back for reference, revealing a previous five-year average of $10.47/cwt. Estimated Choice carcass tonnage was simultaneously up 2.8%.
Moving up the quality spectrum, the calendar year for CAB saw certified carcasses up by almost 7% through mid-December. The CAB boxed beef cutout value advanced four cents, up to $17.74/cwt. over Choice for the year. The tight two-year
average is more aptly compared to the 2016-2019 period with a CAB premium average of $10.75/cwt. Granted, this 65% leap is the smaller spot-market pricing during two volatile years.
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