IOWA develops a sizeable price premium to the Southern Plains in the cash live cattle market, with Nebraska prices not far behind. The premium widened to $4 per cwt live last Wednesday when Iowa sold 2222 head at $190 per cwt live. In contrast, 1425 head sold in Kansas at $186 per cwt live. Dressed prices in Iowa and Nebraska were at $300 per cwt live, an all-time high for dressed prices. Prices the week before last, basis a 5-area steer, averaged $187.47 per cwt live or $298.06 per cwt dressed. These were up $2.35 per cwt and $4.67 per cwt dressed from the prior week and were the highest prices of the year to date. Prices went higher again Thursday in an active trade in all regions, with live prices as high as $193 per cwt and dressed prices as high as $306 per cwt (in Nebraska).
The premium that has developed in the Corn Belt is supportive to the overall market, says Andrew Gottschalk, HedgersEdge.com. But the trend and level in carcass weights, which have advanced contra-seasonally, remain ongoing concerns. Will carcass weights begin to follow a more seasonal trend, albeit while remaining sharply above a year ago, he asks. The answer is “most likely.” That said, the economics of adding additional weight favors doing exactly that. How long can this continue? That answer is longer than one would normally expect, he says. He does not recall a period when the economics of adding weight maintained such a positive disparity between the cost of gain and the selling price of fed cattle, particularly for as long a period as seen recently. Available quantities of feeder cattle and calf offerings should continue to slow, reflecting an ever-decreasing supply, he says.
Beef Cutouts Go Higher
Daily boxed beef prices worked their way higher last week after the comprehensive cutout (cuts, grinds and trim) went sharply higher the week before last. Much reduced slaughter levels rather than stronger beef demand were the main reason for the increases. The comprehensive averaged $308.78 per cwt, up $4.93 per cwt from the prior week. The Choice cutout the first four days last week increased by $1.83 per cwt and the Select cutout increased by $1.33 per cwt. Retail beef and competing meat sales were on the plus side the week before last and weekend, says Gottschalk. Middle meats and ground beef were positive performers. Offsetting this, the export business continues to be lackluster, posting only 680 loads in the most recent weekly report, he says.
Carcass weights meanwhile declined slightly year-over year in the latest reporting week ended March 9 but still remain far above last year. Steer weights averaged 922 lbs, up 3 lbs from the prior week and up 19 lbs from a year ago. Heifer weights averaged 843 lbs, down 3 lbs but up 13 lbs, respectively. Overall weights averaged 842 lbs, up 2 lbs and up 16 lbs, respectively. Cattle continue to grade a high percentage of Prime and Choice. For the same week, cattle graded 10.23% Prime and 74.54% Choice. They graded 12.20% Select.
In another move, Congress passes the Consolidated Appropriations Act 2024, which includes a $15M provision for electronic identification (eID) tags. They will potentially be required by ranchers under the Animal Disease Traceability rules. The National Cattlemen’s Beef Assn (NCBA) responded with neutrality toward the act. As USDA potentially finalizes a traceability rule, NCBA’s priority is to ensure that producers do not incur the cost of complying with this rule, says NCBA’s Ethan Lane. USDA is 2022 proposed changes to its animal disease traceability regulations, looking to make specific animal identification requirements for animals that qualify under indemnification. USDA is still in the process of finalizing the rule.
SUSTAINABLE BEEF NAMES GM
NEW beef company Sustainable Beef LLC appoints Ryan Wagnon as general manager of its new beef processing plant in North Platte, Neb. Wagnon will bring his experience from a 22-year career in beef processing to the role, says the company. He is a graduate of Oklahoma Panhandle State University. He will relocate to North Platte this summer as Sustainable Beef continues to prepare to open its new facility in the summer of 2025. The company plans to hire other senior management this year, particularly in the areas of accounting, human resources, plant maintenance, plant operations, purchasing and safety. Hiring of line workers is anticipated for 2025, it says.
Sustainable Beef first formed in 2020 with plans to construct a $400M plant in North Platte. It broke ground on the more than 500,000 square foot plant in October 2022. It expects to employ over 800 employees once fully operational, with capacity to process more than 1500 head per day and up to 100,000 head per year. A small group of cattlemen and local investors are partnering with Walmart to connect the various points of beef supply chain together to efficiently provide a secure beef supply. Sustainable Beef is creating a unique cooperative model where all aspects of the beef supply chain work together in doing what is best for all parties involved, says CEO David Briggs.
AUSTRALIAN EXPORTERS SEEK COMPARISONS
PROSPECTS of a surge in exports to the U.S of Australian chilled beef are spurring inquiries as to how that beef compares with USDA Prime and Choice beef. The answer right now is unclear, as the two countries operate different carcass grading systems. Meat Standards Australia (MSA), which classifies Australian beef, is attempting to address the issue. MSA has been working on the development of a suite of supporting tools for beef brand owners to help in this process, says Jon Condon of Beef Central. It is hoped these tools will be approved in the near future. The MSA tools aim to address the issue without being interpreted as undermining or disrespecting the long-standing USDA grading system in any way. The challenge is that the USDA and MSA grading systems operate in different ways, making direct comparisons and purchasing actions more difficult. USDA, a single point carcass assessment, makes no allowance for HGP use or hump height, says Condon.
There has been a distinct rise in inquiry from export stakeholders about Australian beef brands and how the MSA program underpins these brands to provide consistent eating quality, says MSA program manager David Packer. Now that there are global beef supply issues emerging, it is almost a perfect storm. MSA has been working more and more in international markets in building knowledge and understanding of MSA over the past year or two, he says. An MSA team visited the U.S. last year working alongside the Meat and Livestock Australia International Markets team. They conducted workshops and worked closely with wholesalers, bigger foodservice and retail players, and even individual chefs, to extend their knowledge of Australia’s program.
Part of the purpose was to encourage a move away from simply trying to compare USDA grades with Australian grades, says Packer. There has also been an effort made to build the confidence and competency of Australian beef brand owners to engage with overseas customers in talking about achieving consistent eating quality rather than simply comparing grading systems. Part of this is through simplifying messaging regarding MSA grading and its unique benefits to underpin brand consistency, he says.
With the emerging supply opportunity the Australian industry is seeing, there is even more demand to work alongside brand owners’ workshops to help educate their customers, says Packer. This means not getting caught up in all the technical detail but how their brands can provide consistent quality for both grain and grass product. It’s about providing assurances that if overseas buyers purchase any well-known Australian beef brand underpinned by MSA, they will get a consistent eating quality experience every time, as well as the value drivers of each unique brand such as sustainability, traceability, raising claims and other features behind Australian beef. The current MSA supporting activities and workshops are not just focused on the U.S. market but are being applied across a range of export markets, he says.
MEAT EATING REMAINS DOMINANT
REMEMBER the dire warning 25 years ago that the next generation would turn their back on meat? This of course turned out to be an unfounded warning. Study after study has shown that meat eating in the U.S. remains dominant. In fact, four out of five Americans still describe themselves as meat eaters and 98% of U.S. households still purchase meat. This is according to the latest annual The Power of Meat report by the Meat Institute and FMI-The Food Industry Assn. The report notes that Gen Xers were the biggest meat eaters in 2023, accounting for 32% of sales, while Baby Boomers were the most frequent meat purchasers at 53 times per year. Millennials spent the most on average per purchase at just under $17. Meat consumption is changing however, with 73% of U.S. shoppers adjusting their purchase habits to save money at the store, says the report. Thirty percent bought smaller packages of meat to cut costs, while 42% bought in bulk to save money.
The Power of Meat study was conducted by 210 Analytics on behalf of FMI and the Meat Institute and was made possible by Cryovac, a division of Sealed Air. Anne-Marie Roerink, principal of 210 Analytics, presented findings from the 19th edition of the annual study during a general session at the Annual Meat Conference (AMC) in Nashville held March 17-20. One question the report’s authors sought to answer was how can retailers win consumer dollars in the meat department when everything is so “stupid expensive?” The authors first shed light on reasons that consumers are pessimistic about the broader economy, and then strategies that meat and poultry retailers can leverage to meet consumers’ needs beyond price.
Meat remains the biggest revenue generator among the fresh departments at retail with $99 billion in sales, 98.2% household penetration and 48 purchases per year, says the report. Data cited from Circana, MULO+ showed that meat department prices rose 2.1% in 2023, below the rate of total food and beverage inflation of 5.9%. Consequently, the sustained impact of several years of inflation caused shoppers to buy products on sale and adapt the amount (54%), type (45%), cut (43%) and brand (40%) of meat and poultry they purchased. Inflationary pressure felt by consumers materialized in the meat department as shoppers bought meat less frequently and bought less per purchase. Dollar sales were flat (0.1%) and volume sales decreased 1.0% year-on-year, according to Circana MULO+. According to data cited from Circana, Generation X, the smallest of the generations, accounts for the greatest proportion of sales at 32%, says the report.
People Are Spending 32% More
Inflation is a pattern seen across the entire store because one thing is for certain, the pressure on America’s pocketbook is real, says Roerink. If we compare today’s food and beverage prices to those seen in 2019, people are spending 32% more on food and beverages than they were prior to the pandemic. They’ve used credit cards to supplement what they make. They’ve depleted the savings that they had. We also know that in March, about this time last year, the additional SNAP benefits ran out. Student loans are due again. So there’s a lot of pressure in the pocketbook and all that is resulting in certain patterns, she says.
Patterns emerging from consumers’ shopping and meal choices show 43% of Americans cutting back on restaurant meals, say Roerink. Meat eaters are buying restaurant meals less often, with 75% saying they try to recreate restaurant-type meals at home. As price-conscious shoppers look for ways to continue enjoying their favorite proteins, they are cooking more at home and including meat in everything from new recipes found online to their favorite comfort meals and holiday feasts, says Rick Stein, vice president of Fresh Foods for FMI. With shoppers including meat in nearly 87% of home-cooked meals every week and looking to meat to make occasions special, the opportunities to provide great choice, taste and value continue to grow, he says.
Beyond price, longer-term demographic trends present an opportunity to align product assortment, marketing and merchandising with changing purchase patterns, says the report. For example, Gen X accounts for the greatest proportion of sales at 32%. If one digs deeper and does the same exercise based on the different generations in the marketplace, you see that the big money makers right now are Gen X, says Roerink.
Boomers Remain Important Group
Baby boomers remain an important demographic for meat and poultry retail because they buy meat most frequently, says the report. Boomers are in the stores quite a bit, says Roerink. They don’t spend as much as the other generations while they’re in the store but look at their number of trips at 53 times per year compared to just 40 times per year for millennials. But the latter spend the most money per meat purchase, according to Circana data. This means that each and every time millennials are in the store, one needs to make sure that those purchases count, says Roerink.
Retailers can optimize trips and units sold per trip by leveraging consumers’ acceptance of case-ready meats which have reached record highs, says the report. Based on the study’s findings, Roerink recommends that retailers consider pack size variety, freezer-ready packaging, secondary displays and cross-merchandising. Additionally, a majority of consumers (91%) surveyed for the report said they can be persuaded to spend a little more on meat and poultry. Top reasons given for spending more include holidays, special occasions and entertaining friends and family. This trend emphasizes the need to optimize sales during primary holidays like Thanksgiving and secondary occasions such as anniversaries and birthdays, while recognizing that traditions are changing. A cut or kind of meat/poultry that consumers deem healthier, a preferred pack size or brand and convenience can also prompt them to splurge a little, says the report.
Building on perceptions of health and nutrition, seven in ten consumers believe meat is an overall healthy choice that provides fuel and essential nutrients, says the report. 83% of meat shoppers consider at least one “better-for” attribute when buying meat. However, consumers are also interested in portion size variety and suggestions for nutritious choices without sacrificing taste or paying more. The Power of Meat study found that, compared to 2008, protein is a more desirable package callout, while fewer consumers are focused on fat, sodium, cholesterol and saturated fat when buying meat and poultry, says the report.
Brands Should Tell A Story
Consumers continue to favor brands that can tell the story of where the meat and poultry comes from, says the report. The meat and poultry industry has done an excellent job of this as 55% of consumers said they feel good about animal welfare practices in the U.S., up from 43% in 2020. Shopping for meat and poultry is a balancing act between money, time, nutrition, taste and meal occasion for consumers. Convenience is important but price takes precedence for shoppers trying to manage tight household budgets. The solution for a majority (87%) of consumers is meals that mix prepared foods and scratch-cooked items. But price has become a headwind to that trend, says the report.
While most consumers spend less than 30 minutes preparing dinner, they purchased value-added in 2023 that was typically sold at a price premium less often, says the report. This resulted in value-added meat and poultry sales being down across most proteins in 2023 for the first time in years. As for younger meat and poultry shoppers, retailers need to meet them where they are. For millennials and Gen Z, that means social media platforms. Gen Z draws meal inspiration from TikTok, YouTube and Instagram, whereas Boomers rely on routine meals, family/friends and recipe websites. This shows the importance of providing meal inspiration across platforms and closing the gap between inspiration and purchase, says the report.
Finally, price and promotions are important to consumers but taste will keep them coming back and buying meat, says the report. Help shoppers create meals they want to make again: 92% of shoppers agree that meat/poultry can be a great price but if it does not taste good, they will not buy it again. Retailers should also emphasize quality and taste and provide relevant tips by preferred cooking appliances. Air fryers are now the number three appliance in preparing meat and poultry, behind the stove and oven, says the report.