US wholesale beef prices see significant increase

The US cattle and beef industry has seen a significant rise in livestock and wholesale beef prices in recent months.

Contrary to the rising trend, USDA retail data indicate US beef retail prices have declined on average 2% for the first quarter of this year.

The increase in cattle and wholesale beef prices so far this year has been attributed to a year-on-year decline in US beef production during January and February, lower beef imports for the first quarter of this year, particularly from Australia, a progressive decline in US cattle on feed numbers for the past five months (December 2009 to April 2010), an increase in total US beef exports and signs that US restaurant industry sales recovering.

US analysts and market participants are now questioning whether the market can sustain higher livestock and wholesale prices, or whether US retailers and foodservice operators will increase prices of meat items.

The USDA expects US cattle prices for 2010 to average 8% higher than last year, amid an expected 1% decline in beef production and a 9.7% increase in beef exports.

Given this, US retailers and foodservice operators will unlikely sustain lower beef prices coming into a peak US demand period for beef, unless they continue to absorb the higher cost of rising wholesale beef prices into their margin.