My monthly column in May discussed the importance of beef demand and its positive impact on the market through the spring of 2017. The column explained that better beef sales in recent months are, “…the result of a long-run commitment to quality by the beef industry. …that is beginning to pay real dividends for the industry…Better beef quality and consistency are underpinning demand creation and pricing power that’s not been experienced previously.”
One of the best examples of that reality can be witnessed with the rib component of the beef cutout during the past several months. As review, the primal rib derives any number of cuts but best known among those includes rib roasts, ribeye steaks and short ribs. For more info on sub-primals see the Beef Cuts Guide.
Typically, the rib’s contribution to the overall cutout value hovers around 16-18%. Moreover, that contribution typically peaks around the winter holiday season, with prime rib being a family favorite in many households on Christmas day. However, the wholesale market has seen an especially strong surge around rib values in recent months.
The composite rib value bottomed in mid-February around $280. Since that time, the primal has added on nearly $140 – or an additional 50% - to index nearly $420 as May business was coming to a close. Moreover, the recent gains represent a significant break to the longer-running price range, which has been stuck in a downward channel. The rib represented nearly 20% of the cutout’s value in late-May – a new mark for spring trade.
The last time the rib surpassed $400 was back in 2014; at that time, beef production was running closer to 465 million pounds on a weekly basis. Meanwhile in 2017, while the rib was surging to new records, production has been averaging closer to 485 million pounds per week.
That sort of trading action represents yet another signal for positive beef demand. It’s clear that consumers are enjoying the benefits of beef quality beef – especially in higher-end cuts.
That’s a similar trend to what the market experienced last year: “In combination, high-end, high-quality beef has been the driver of the market in recent months and appears to be the impetus for packers chasing cattle…”
How do you perceive this trend with respect to consumers and beef demand? Is this another indicator of favorable positioning for the beef industry in the marketplace? Or do you believe this spring’s rib surge is simply a flash-in-the-pan unique to 2017? Leave your thoughts in the comments section below.
Speer is based in Bowling Green, Ky., and serves as vice president of U.S. operations for AgriClear, Inc. – a wholly-owned subsidiary of TMX Group Limited. The views and opinions of the author expressed herein do not necessarily state or reflect those of the TMX Group Limited and Natural Gas Exchange Inc.