High Beef Prices Are Challenging Consumer Demand

With April Live Cattle Futures at $136, analysts with the Livestock Marketing Information Center say the implied Choice cutout value for next year is $205.50/cwt., 12% higher than this year. And that's if packers struggle to pass along higher costs to buyers.

Wes Ishmael

September 15, 2012

1 Min Read
High Beef Prices Are Challenging Consumer Demand

Perhaps unsurprisingly, a recent study funded by the Beef Checkoff says the primary limiters to increased domestic beef consumption relate to price. The study included more than 3,000 consumers.

For example, 64% of those surveyed said they would probably or definitely increase consumption if large-quantity family packs at a lower price per pound were more available.

Unfortunately, beef prices will get higher.

Last week the Livestock Marketing Information Center (LMIC) forecasted fed cattle prices in 2013 to increase year-over-year in every quarter.

LMIC analysts explain the daily average Choice boxed beef cutout value has never been more than $198.80/cwt. (in February this year). It has never been higher than $197.24 (June this year) for a monthly average. Plus, the margin between cutout values and live fed cattle prices has been historically narrow.

“…So, with April 2013 live (fed) cattle futures at $136, what does that mean for wholesale beef prices?” LMIC analysts ask. “If beef packers struggle to pass along those higher cattle costs like this year, then a record-high Choice cutout of about $205.50 is implied, a year-to-year increase of 12%. However, if the U.S. economy improves and packers can get their margins back to normal, that wholesale value will surge to $228.50, 25% above 2012’s. Even a 12% increase is large and may require an improving U.S. economy so that higher cattle costs can be passed along to consumers.”

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