May 3, 2013

 

 

As warm, dry weather arrives over much of the country, which is conducive for backyard cookouts, US beef prices jumped to a 10-year high.

 

Until this week, spring weather has been a mixture of cold, snow, frost and rain, none of which is favourable for picnics or backyard cookouts. But as temperatures rose across much of the country this week, reaching the 80s Fahrenheit in Chicago, analysts expect a seasonal surge in beef sales.

 

The wholesale price choice beef, or cut out, on Wednesday (May 1) jumped US$3.10 to US$199.49 per 100 pounds (cwt), the highest since US$200.65 on October 20, 2003, according to USDA data.

 

"We have not yet seen the big demand push we normally get by this time of year because of weather issues. But the cut out surge suggests a kick-start for grilling, Mother's Day features and Memorial Day bookings," said Don Roose, analyst with US Commodities in Des Moines, Iowa.

 

Consumers already are paying record high prices for beef and the latest surge in the wholesale market may push supermarket prices even higher.

 

Despite temperature spikes this week that were more reminiscent of summer than spring, snow and freezing rain continue to cover parts of the Midwest, and more cold is forecast. Temperatures in Amarillo, Texas, on Tuesday (Apr 30) topped out at 97 degrees Fahrenheit (36 Celsius) with temperatures expected to plunge into the low 30s F by Thursday morning, said David Hales, president of Texas-based Hales Trading Co.

 

At supermarkets the average beef price in March was a record US$5.30 per pound, eclipsing the previous record of US$5.15 set in November, according to USDA's Economic Research Service.

 

Those higher beef costs and reduced consumer discretionary spending may cause some consumers to switch from beef to other competitively priced meats.

 

"We saw a lot of cheap pork and poultry in stores and we have not seen very good beef features in a long time, which may explain what's driving beef demand now," Hales said.

 

Analysts were divided about whether current beef demand will be strong enough to hoist the cut out above the record of US$201.18 on October 16, 2003, following an outbreak of mad cow disease in Canada.

 

Those predicting even more gains in wholesale beef prices say beef production will likely go down as the US cattle herd is the smallest in 61 years. The herd was shrunk as severe drought damaged pastures and drove up feed costs.

 

Cargill Inc. early last month said pressure from the historic US drought hurt its meat and grain operations, knocking quarterly earnings down 42%. Others believe wholesale beef values may have peaked, arguing that cattle weigh more thus producing more meat for consumers.

 

"That second week of May is when we seasonally run out of gas. We tend to see more numbers of cattle and they tend to put on more weight because of better weather," said Roose.