Processing Capacity

Wholesale beef prices are getting close to last year's lows, thanks to breaks in production logjams at slaughter facilities.

That's what Texas A&M AgriLife Extension economist David Anderson is seeing. He reported choice beef cutout (steaks, briskets, prime chuck, roasts) peaked at $4.59 per pound as Covid-19 began to interrupt production. Last week, that price was down to $2.41 per pound. That is close to June 2019, when it was at $2.22 per pound.

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

He added day-to-day beef production has surpassed 2019 numbers, another indication bottlenecks at processing facilities are opening. Processing capacity, however, remains below 100%.

"Prices are coming down as packers return to capacity," he explained. "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 onto cattle longer than normal."

Moving into July, Anderson said he expects retail prices to reflect the drop in wholesale prices.

"There's always a lag to these price changes. 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."

The economy, noted Anderson, is the wildcard that will drive beef prices as the country nears the July 4th holiday.

"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. What kind of economic recovery will we see? A V-shaped recover is the best case, but if it's not that means there are a lot of struggles, not just in the beef market."

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