Beef Demand Confusion

Implications: The recent inflation in the USDA choice beef cutout has been mostly due to appreciation in many of the end cut sections of the carcass.  This could be could good news for beef middle meat and portioned steak buyers going forward.  Probably not good news for beef trimming and grinds buyers. 

Analysis:

 The USDA choice boxed beef cutout index is released daily and is used as an indicator of overall choice beef prices.  The primal markets are indexes of the different sections of the bovine carcass.  For the most part, the restaurant industry typically focuses on two primals, the ribeye and loin which produce most of the tender steaks that consumers enjoy at home and at restaurants.  The recent inflation in the USDA choice beef cutout has been mostly due to appreciation in many of the end cut sections of the carcass.  This could be could good news for beef middle meat and portioned steak buyers going forward.  Probably not good news for beef trimming and grinds buyers.  How so?  Well, appreciation in the end cuts and grinds is enabling beef packers to sell middle meat products at a discount to a year ago while at the same time receiving more value for their carcass.  Yes packers would like to sell middle meat cuts at higher prices, but at this stage the general consumer doesn’t seem able to support them.  So going forward we may see more of the same if retailers and consumers focus on the less expensive beef cuts.  Beef steak cut prices below year ago levels, and end cuts, grinds and trimmings at sharply higher levels than last fall.