Derrell Peel, Oklahoma State University Extension livestock marketing specialist, said the Christmas rally in wholesale beef markets has continued as boxed beef prices headed into the last half of December at the highest levels since early September.
The Choice boxed beef price rose 6.7% from the late-October low and was only 2.3% below year-ago levels. Peel said this is quite impressive given that beef production continues to be stronger than expected in the fourth quarter. Beef production for the last four weeks has been 9.1% above the same period last year. For the year to date, Choice boxed beef prices have been an average of 12.9% lower than year-earlier levels, while beef production has been up 5.7% to date.
Peel reported that the retail Choice beef price in November was $5.76/lb., up slightly from October and down 7.2% from one year ago. The all fresh retail beef price was $5.54/lb., down from $5.63/lb. in October and down 7.5% from last year.
“Despite larger total meat supplies and a particularly strong jump in beef production, retail beef prices have maintained strong ratios to pork and poultry but are slowly adjusting down,” Peel said.
In November, the all fresh beef-to-pork retail price ratio was 1.53, down from the peak of 1.65 in June 2015. This ratio averaged 1.33 in the five years from 2009 to 2013 and has averaged 1.5 since January 2014. The all fresh beef-to-broiler retail price ratio was 2.93 in November, down from the peak of 3.13 in May 2015. The 2009-13 average for this ratio was 2.4, but it has averaged 2.98 since January 2014.
“There are indications that retail beef demand has shifted somewhat back to the middle meats after several years of relatively stronger end meats," Peel said. "End meats have carried a relatively higher percent of carcass value since the recession that began in 2008.”
Mixed strength in steak demand has been countered by weak processing beef markets and lower end meat values generally in 2016, he added.
“In the last four weeks, rib primal values are nearly 3% higher than this time last year, mirroring higher rib-eye wholesale values," Peel said. "However, loin primal value is nearly 12% lower in the past month year over year, with strip loin and short loin values down double-digit percentages and tenderloin values just about equal to one year ago.”
According to Peel, the lower loin cut values is a continuation of an apparent downward trend in relative loin values in the past decade.
Chuck primal values have been down just more than 6% year over year in the past four weeks, with round primal values down 8% compared to last year.
“Domestic beef demand in 2017 will depend on macroeconomic factors such as income growth and unemployment, as well as the impact of larger total meat supplies. Beef export and import flows not only have a quantity impact but also change the mix of beef products that make up domestic consumption and will impact overall beef demand in 2017,” Peel said.