December 15, 2014

Slower US beef sales despite pre-holidays season

Even with the coming Christmas holidays in the US, sales of beef, such as ribs and roasts, are hampered due to a combination of higher meat prices and weaker demand, according to a Wall Street Journal report.

"The export business appears to have tailed off and (domestic) holiday buying should have been coming into the picture (last) week, but I just really haven't seen it yet," Mark Schultz, a chief analyst with Minneapolis-based Northstar Commodity said.

Beef prices jumped after the US sees its smallest herd of market-bound livestock in decades, leading to a US$1.71/pound price for live-cattle.

In November 2014, the USDA estimated a 12% increase in beef prices for 2014, way above the year's total inflation rate for food seen to be at 2.5-3.5%.

In response to the recent trend in demand, live-cattle prices have declined by about 5% in the past month, falling from all-time high records. In addition, choice-grade beef sees a 2.2% dip in prices over the week through Friday.

Beef exports are also affected, with a 2.2% drop in October this year in   comparison to the same period in 2013. According to the US Meat Export Federation, that percentage fell to 76,472 tonnes.

The current market situation has left processors and feed yard operators in a challenging position.

The December contract for live-cattle slid 1.5% last week to US$1.6205/pound on the Chicago Mercantile Exchange. The January contract for lightweight animals, known as feeder cattle, suffered a 3.9% loss over the week, settling at US$2.256/pound.

Based on a Commodity Futures Trading Commission report, managed funds has placed more than 9,000 wagers on rising cattle prices in the week through Tuesday. The figure represents 98,389 contracts, a 10.2% drop from the previous week.