Wholesale beef prices have been climbing at a rapid pace, with the choice cutout value up nearly $30 over the past three weeks. Every part of the carcass is participating in the move, with loins leading in terms of weighted value appreciation both week-on-week and year-on-year.
What is driving the rally
Two forces are behind the move. On the supply side, combined steer and heifer slaughter under federal inspection totaled 2.57 million head in the six weeks ending late February, down 8.9% from the same period last year, as packers were operating at a loss and reducing throughput. A strike at JBS’ fed beef processing facility in Greeley, Colorado, involving 3,800 workers, has added further uncertainty to the supply picture this week.
On the demand side, some of the recent price strength reflects normal positive seasonality rather than a fundamental shift in buying behavior. There are indications that loin demand has actually entered a cooling cycle on a seasonally-adjusted basis.
Correction expected in April
Despite the current momentum, the outlook points to a pullback. The Greeley strike is not expected to add meaningful supply constraints beyond what was already in place. If energy prices remain elevated due to the Middle East conflict, consumer demand could soften noticeably by summer, weighing on beef prices.
The analysis also points to disconnects across the value chain, with feeder cattle considered overpriced relative to fed cattle, and fed cattle overpriced relative to beef. A setback is expected in April, with wholesale beef prices likely to struggle through the warmer months.
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