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With the US summer grilling season underway, beef’s seasonal demand strength is edging out other meats for a share of Americans’ plates.
Beef production is high, beef prices are high, and beef stocks are falling fast on strong demand. This is good news for cattle ranchers, cattle processing plants, restaurants, and grocers.
At 1.75 million tonnes in May, beef production was 2.9% larger than in the month prior and 1.1% larger than the same month last year. Beef production has entered its period of seasonal strength, and demand is even stronger than production. To be sure, chicken remains America’s top-selling meat all year round, but the growth in beef sales is outpacing that of chicken so far this summer.
The left chart above shows the strong drawdown in total beef stocks in cold storage. Beef stocks so far in 2019, indicated by the line with markers, have declined 21% from January to May. The right chart shows the high level of beef production relative to the last 30 years, with the current year indicated by the line with markers.
Wholesale prices in May averaged $2.21 a pound for the 600- to 900-pound cutout, 8% higher than the 10-year average for that month. Since the beginning of the year, beef prices have become less and less competitive against pork and chicken prices. Over the last six months, they have risen 1% relative to pork prices and 4% relative to chicken prices. USDA ERS expects this trend to continue through the remainder of 2019; the agency forecasts prices for direct sales of choice steers in the five-area region (TX/OK/NM, KS, NE, CO, IA/MN) in this year’s second through fourth quarters to increase 31% relative to pork compared to the same period the previous year. USDA ERS also expects choice steers to increase 13% against chicken.
Underlining strong consumer demand for beef is that cold storage stocks of beef are declining despite the high prices and production. Stocks have been more strongly drawn down so far this year than during any of the previous 10 years. In 2019, beef stocks fell 21% between January and May, the latest month for which cold storage data is available. The 10-year average drawdown for the period is 9%. In only one year, 2017, were stocks drawn down more (24%).
The chart above shows wholesale beef prices were moderately strong and steady around $2.21 per pound during the first half of 2019, averaging 11% higher than the first half of the past 10 years.
By comparison, chicken and pork stocks have not exhibited such declines. Cold storage stocks of chicken have remained historically high at 834 million pounds in May, not far from the levels seen so far this year. May’s total is 3.5% larger than chicken stocks’ five-year average, which is 806 million pounds. At 285,000 pounds in May, pork stocks have also been fairly steady this year. This is 8% larger than pork stocks’ five-year average.