Improved processing capacity could mean lower beef prices at grocers

Wholesale beef prices are dropping as the production logjam in processing plants created by COVID-19 continues to loosen and return to normal, said a Texas A&M Agrilife Extension Service expert.

David Anderson, PH.D., Agrilife Extension economist, College Station, said wholesale beef prices were nearing last year’s lows.

Choice box beef cutout, which includes large cuts of beef that represent cuts like steaks, briskets, prime chuck and roasts, peaked at $4.59 per pound as COVID-19 began affecting the nation’s production capacity. Last week, the wholesale price was $2.41 per pound and nearing the price for June 2019, $2.22 per pound.

“As packing capacity recovered, the price has come back down to Earth,” he said. “Choice box beef cutout is a good representation of the wholesale value of a carcass, and so it appears that prices are returning to normal.”

Anderson said individual wholesale cuts, ribeyes for example, have also started to decline. They peaked at $11.62 per pound and have fallen to $9.52 compared to $7.83 a year ago. Chuck roasts were $6.29 per pound wholesale and have fallen to $2.57 per pound as production capacity returns.

Day-to-day beef production has surpassed 2019 numbers, which is another indication bottlenecks at processing facilities were opening, he said. But processing capacity remains below 100%.

“Prices are coming down as packers return to capacity,” he said. “Beef production was larger than the same week a year ago but it’s because feeder cattle weights are up due to good spring conditions and producers and feedlots hanging on to cattle longer than normal.”

Anderson suspects it’s only a matter of time before wholesale price declines translate into lower prices for consumers at grocery stores.

Retail prices were very high as the pandemic sent shockwaves throughout the market, he said. Rushes on meat products, restaurant closures and unemployment are among the factors that contributed to a highly volatile beef market.

Last month, the U.S. Department of Agriculture reported retail prices for all quality cuts averaged $7.59 per pound compared to $6.17 per pound last May.

Anderson said he expects retail prices in June and July to reflect the drop in wholesale prices.

“There’s always a lag to these price changes,” he said. “It will be interesting to see where wholesale prices end up and whether the prices at grocers will be as dramatic as what we’ve seen with wholesale.”

Despite being in the heart of grilling season with the Fourth of July holiday coming up, Anderson said the economy will be the wildcard that drives beef prices – especially for ground beef, steaks, briskets and the rest.

“We still have a recession, 40 million people unemployed, falling incomes, restaurants at partial capacity and none of that is good for beef, especially high-value cuts,” he said. “What kind of economic recovery will we see? A V-shaped recovery is the best case, but if it’s not that means there are a lot of struggles, not just in the beef market.”

Agrilife Extension district reporters compiled the following summaries:

CENTRAL

Conditions continued to be hot and dry. No rain was in the forecast, and temperatures were expected to be above normal. Counties reported adequate to short soil moisture levels. Crops and grasses continued to struggle as dry conditions persisted. The district was listed as being “abnormally dry” in the state drought monitor. Irrigated crops looked good, but all dryland crops and fields were showing symptoms of drought stress. Grasshoppers were increasing in number. Most producers were cutting and baling their first round of hay. Livestock were in good condition. Some brush control work was done. Wheat and oat harvests were wrapped or wrapping up for most producers. Yields varied a great deal depending on location. Early planted corn and late-planted fields were progressing very differently. Early corn looked very promising but needed rain while late-planted corn was struggling and needed moisture badly.

Grain sorghum was heading out well and looked decent. Cotton looked OK but needed a good rain. Pasture and rangeland conditions were declining. No soybeans, sunflowers, rice or peanuts were planted so far. Cattle were in good body condition, and stock tanks were full.

WEST CENTRAL

It was a dry, windy reporting period. Temperatures were up and down from record highs to record lows. Cotton needed a rain to emerge and grow. Sorghum needed rain as well.

SOUTHEAST

Days were hot and drying soil moisture levels down. Pastures were drying up quickly.

Rangeland and pasture ratings varied from excellent to poor with good ratings being the most common. Soil moisture levels ranged from adequate to surplus with adequate levels being the most common. SOUTHWEST

Moisture conditions were declining with no precipitation and high temperatures reported. Sutton County reported a wildfire burned 1,530 acres. Hay producers were busy cutting pastures. Yields were above average, and quality was high. Corn and sorghum fields looked good. Farmers with irrigation were watering. Rangeland and pasture conditions were fair to good but dwindling due to a lack of moisture. Livestock conditions were fair to good. Late marketing of spring calves continued. Caldwell County reported cattle markets were improving slowly, and sheep and goat markets were still high. Wildlife were in fair to good shape.

SOUTH

Mild weather and adequate to very short soil moisture levels were reported. La Salle County reported about 1 inch of rain during a severe storm that brought high winds and rain. Maverick County reported no rain and daytime temperatures around 100 degrees every day. A cool front in southern areas of the district lowered nighttime temperatures. Conditions were mostly favorable for crop progress. Peanut planting and potato harvest continued. Cotton fields were in the match square to bloom stage and making good progress in most areas. Some cotton in southern parts of the district were setting bolls. Corn fields were drying out and maturing. Some corn was in the dent stage. Some grain sorghum and early planted corn were being harvested in Hidalgo County. Sesame fields near Mccook looked in excellent condition following recent rains. Most row crop yield potential improved due to rains. Other crops like watermelons and cantaloupes were in full production. Pecan orchards were developing well, and there were no reports of pest issues, so far. Wheat harvest was complete.

Bermuda grass hay was cut and baled. Irrigated pastures were producing good yields and quality bales. Native and non-native grasses were green and very beneficial for wildlife and cattle. Sunflowers and sorghum were continuing to grow. Forage availability improved and continued to be enough to support livestock in most areas, but conditions were declining in drier areas. Some producers were providing supplemental feed for livestock and wildlife. Stock tanks were full.