Barring any major setbacks, the beef markets appear to be moving past the worst of the disruptions that caused upheaval in recent weeks, according to Oklahoma State University Extension livestock marketing specialist Derrell Peel.
“Beef markets were thrown into turmoil in March as foodservice markets were sharply curtailed and beef demand focused on retail grocery. This caused bottlenecks in supply chains and an initial wave of disruptions in product flows,” Peel said.
Beginning in early April, COVID-19 began to affect workforces in many meat processing plants, causing closures and reduced slaughter rates. As a result, Peel said cattle slaughter and beef production decreased on a year-over-year basis for four consecutive weeks, the lowest point of which occurred in the last week of April, when total cattle slaughter was down 34.8%. Beef production that same week was down 33.8% compared to the same week one year ago.
Peel relayed that significant recovery from that low has occurred, with estimated cattle slaughter the week ending May 30 down only 10.9% year over year. With cattle carcass weights increasing sharply due to delays in marketing fed cattle, estimated beef production last week was down just 7.6% year over year, he added.
Choice boxed beef prices increased beginning in late March until late May. After averaging under $210/cwt. early in the year, Choice boxed beef prices increased in late March and dropped briefly in early April before increasing to a peak at $459.04/cwt. in mid-May. Peel reported that Choice boxed beef prices dropped to a weekly level of $374.04/cwt. at the end of May.
According to Peel, individual beef products have been on a wide variety of dynamic paths through all the turmoil on both the supply and demand side.
“Prices for beef products dependent on foodservice demand, including many middle meat cuts, dropped in March before general shortages of products pushed prices higher in April and May,” he said.
Peel reported that Choice wholesale beef tenderloin, for example, dropped from an average price just under $970/cwt. early in 2020 to a weekly low of $533.33/cwt. in early April before increasing to a mid-May peak of $1238.88/cwt. Choice tenderloin prices decreased to $1219.68/cwt. at the end of May.
Meanwhile, Peel noted that many end meats from the chuck and round saw increased demand beginning in March, which continued through April and were pushed even higher by decreased beef supplies into mid-May. The price of chuck rolls increased weekly beginning in mid-March from a pre-COVID-19 average near $266/cwt. to a peak in early May of $628.94/cwt. before dropping back to $466.03/cwt. at the end of May. Several products in the round displayed similar price patterns since mid-March, Peel explained.
“The last few weeks have revealed much about the nature of specialized beef supply chains and much about the variable demands for the wide variety of beef products. It has also revealed how market prices adjust to wild swings in beef product demand and supply conditions,” he said.
Looking ahead, Peel expects additional dynamics to emerge as foodservice continues a slow recovery and macroeconomic conditions continue to affect beef demand. However, he said hopefully beef product markets are settling back into a much more stable situation and with typical product price relationships re-established.