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Watching beef demand

Ag Marketing IQ: Will summer grilling demand continue to sizzle?

Naomi Blohm, senior market adviser

May 25, 2023

5 Min Read
hamburgers on grill
Getty Images

Summer is here. The grills have been cleaned up and are ready to fire up. Local grocers have been advertising various specials, with the bulk of the newspaper ads pushing hamburgers and brats (at least here in Wisconsin, where brats are king).

Demand for early summer grilling has kept beef prices firm, but I wonder what will happen in a few weeks, once the demand for Father’s Day and Fourth of July grilling has waned?

Current domestic demand

Heading into summer holidays and grilling season, recent boxed beef values have been increasing to meet short term demand. Gains have been noted for rib, briskets, loins, with the largest gain coming with rounds and chucks. Consumers want less expensive beef; it’s why chucks and rounds are in demand, as they are currently viewed as a less expensive cut of beef.

For the USDA Monthly Cold Storage report, released earlier this week, frozen beef stocks came in at 447.9 million pounds, down 15.8% from last year and down 6.2% from last month. Again, this shows short-term demand remains firm.

This week’s cash cattle trade turned active on Wednesday, with 5,353 head traded in Kansas at an average price of $171.24. 2,538 head were traded in Nebraska with an average price of $180.91. And in Texas, there were 3,599 head traded at $170.88. Also shows further evidence of short term demand for the summer grilling season.

Export demand

Looking at export demand, the most recent USDA weekly beef export report showed that beef net export sales were at 18,300 MT for 2023 (up 5% from the previous week and 15% from the prior 4-week average). Japan, South Korea, China, Mexico, and Taiwan were the biggest buyers.

While currently U.S. demand for beef for export remains a positive demand feature, I’m starting to take note of increased beef production in Brazil, which could compete against U.S. exports.

According to the Brazilian Institute of Geography and Statistics (IBGE), Brazil’s livestock production in 2023 has increased nearly 5% in the first quarter of 2023 compared to same period in 2022.

If U.S. beef prices get too high, will we see Brazil swoop in and offer cheaper beef (as they have done recently with corn and soybeans)? With increasing competition from Brazil along with expected increased cattle production in Australia, it may be hard to continued large exports of U.S. beef.

Production meets expectations

The most recent Cattle on Feed Report was mostly in line with expectations. Supplies of Cattle in this country continue to be on the historically smaller side. The “on feed” number came in at 97%, the “placement” number at 96%, and the “marketed” number came in at 90%.

With no bullish or bearish surprises in the report, the market had little reason to extend the recent rally, nor was there a fundamental reason to see a price setback. Going forward, live cattle futures price direction could depend what cash beef prices do over the next week and month.

Most of the cattle fundamentals continue to be friendly, and at the moment, prices will likely stay firm for now. But my mind continues to circle back to short term domestic demand.

Last year, the trend was to grill steaks for the summer holidays. However, with inflation hitting the consumer at every level, it is starting to noticeably appear that the consumer is opting for cheaper hamburgers over steaks this year for Memorial Day, Father’s Day and July 4th.

I’m also cautious about the long fund position in live cattle futures. They are long over 100,000 contracts, and if the funds decide to take profits and sell those long positions into the end of second quarter, we could see futures prices slide lower during the month of June, right at the same time that the early summer grilling demand has been met.

While there currently is no specific sign of a top in the U.S. cattle market, a bit of caution is to be noted. Prices are at historical contract highs for live cattle and feeder cattle, and if there starts to be a demand pullback, some of the bullish sentiment may get removed from the higher priced values.

Reach Naomi Blohm at 800-334-9779, on Twitter: @naomiblohm, and at [email protected].

Disclaimer: The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Examples of seasonal price moves or extreme market conditions are not meant to imply that such moves or conditions are common occurrences or likely to occur. Futures prices have already factored in the seasonal aspects of supply and demand. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation.

The opinions of the author are not necessarily those of Farm Futures or Farm Progress. 

About the Author(s)

Naomi Blohm

senior market adviser, Total Farm Marketing by Stewart Peterson

Naomi specializes at helping farmers understand how to manage cash marketing needs and understand the importance of managing basis, delivery point considerations, cash flow needs and storage capacity. She earned her Bachelor of Arts in Political Science with a minor in Agriculture Business at the University of Wisconsin in Platteville. She has a Master of Science in Adult Education with an emphasis in Ag Economics from the UW-Platteville and a Master Certificate in Global Education, from the UW-Oshkosh.

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