Several times during the past year, Industry At A Glance has reviewed the relative contribution of middle meats versus end meats. Those analyses have revealed an important trend occurring in the beef market—and that is, the relative contribution of each portion is diverging.
As review, the overwhelming majority (~90%) of the cutout is comprised of the four major primals: round, loin, rib, and chuck. USDA explains that, “The boxed beef cutout represents the estimated gross value of a beef carcass based on FOB prices paid for individual beef items derived from the carcass.”
In other words, packers report individual item wholesale values based on their respective sales to customers. Those prices are then aggregated by USDA into an index for each primal and then subsequently compiled into an overall cutout value.
This week’s illustration highlights the strong surge in the contribution of the middle meats (rib and loin) that started in early January 2015. The graph reflects 26-week moving averages to remove some of the weekly noise. That surge peaked late summer 2016.
However, as the relative middle-meat contribution waned, the new low marks are almost equal to the longer-running resistance points – hence reflecting the divergence over time.
Based on this data, it appears the rib and loin continue to find new pricing power in the marketplace. Couple that with some of the trends in quality grade market trends featured in previous weeks by this column, there’s seemingly a strong, sustained signal for high-quality beef. Consumers are willing to pay for beef at the top end of the scale. That’s a favorable sign for beef demand and underscores the importance of de-commoditizing beef (versus pork and poultry).
How do you perceive this trend around middle meats and beef quality? Leave your thoughts in the comment section below.
Nevil Speer serves as an industry consultant and is based in Bowling Green, KY. Contact him at [email protected]