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Beef sales face challenges for the upcoming year

Progressive Cattleman Editor David Cooper Published on 24 May 2013


A few weeks ago while visiting family members, I had a chance to chat with a nephew who manages an independent grocery store.

After attending trade shows where analysts gave their market forecasts for 2013, I figured his insight might be the most intuitive of them all.

Who better to gauge beef sales than the guy buying it in bulk for the neighborhood market?

So just how well was beef selling out of his store’s freezers? Let’s just say it’s a bit chillier than we might expect.

Customers in his Utah store are still putting their pocketbook ahead of their most rewarding dinner options. The cost of beef – both with ground beef as well as leaner muscle cuts – is putting some pain on the family budget.

People still love beef, he explained, but they’ll mostly pick the affordable options. And right now the economy is leading many buyers’ grocery carts to other proteins.

The surge in beef prices over the past two years, which has coincided with periods of tight cattle supply across the U.S., has provided a shot in the arm for the cattle industry.

It’s worth remembering that in December 2008, the Chicago Mercantile Exchange price index for feeder cattle dropped to $88 per hundredweight (cwt). As of early May 2013, even after a four-month decline, the price index is around $135 per cwt.

Producers clearly need to capitalize on those high prices, especially when the expenses related to fuel and feed remain so high, and the looming drought poses an even bigger threat to grazing forage.

Furthermore, in a recent Progressive Cattleman poll that asked respondents what they think of the high prices for feeder calves and retail beef, the majority still felt the market needs to reward them.

Almost 39 percent of those responding said high prices were in fact still too low. It’s still hard to build profit margins when inputs are so high.

Thirty-two percent said prices were just right, and another 29 percent said the prices are too high for the consumer.

While I understand the majority’s reasoning, there’s reason for caution in that 29 percent that’s reluctant to stick a higher bill to the consumer.

If today’s market proves anything, it’s that buyers change their patterns on a whim. Add in economic strain, and the choice becomes easy on what and how you eat.

In this issue of Progressive Cattleman you’ll find a variety of reports and features to outline where we stand at the midpoint of 2013.

From the industry outlook written by Wilson Gray and James Robb (click here to read) to the 2012 U.S. beef statistics poster included inside, it’s apparent that U.S. producers are solidifying beef production while still seeing a declining herd.

But to make that product truly profitable, the sale depends on a buyer that can afford the quality that’s made. That dynamic could be challenged further in 2013.  end mark

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David Cooper
Editor
Progressive Cattleman magazine

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