Boxed beef prices have been climbing during the first half of June, supported by a number of factors, University of Tennessee ag economist Andrew Griffith says.
“Wholesale boxed beef prices have been making a run since the beginning of June with Choice box prices more than $34 per hundredweight higher than two weeks ago,” he says. “It is necessary for packers to push boxed beef prices higher given the price they are paying for finished cattle. ”
Griffith says holidays play a role in seasonal demand.
“Holidays during the summer months certainly support beef movement and prices,” he says. “In the same breath, Independence Day is less than three weeks away, and it tends to be a strong holiday for beef disappearance.”
The rate of beef being bought and consumed this summer will help show if demand can remain strong despite higher beef prices, Griffith says.
“Beef disappearance throughout the summer will provide a good indication if consumers will continue to be willing buyers despite high beef prices, inflationary factors of other goods, and higher interest rates,” he says.
Griffith is continuing to watch cattle futures prices as well.
“The big story for the second full week of June is the softening of cattle futures,” he says. “Following five months of what has seemed like steadily higher futures prices, traders have slowed the push for higher prices and have allowed prices to decline. The question among analysts is if this is simply a minor correction or if the market is going to trade significantly lower in the coming weeks.”
Ongoing drought issues will also play a role.
“From the fundamental perspective, cattle supply is unchanged from expectations, but drought concerns across the Plains and much of the Midwest is resulting in higher corn prices, which means a higher cost of gain in the feedlot,” Griffith says. “At the same time, there appears to be continued inflationary concern as consumers are still paying more at the grocery store.”
Griffith still expects cattle prices to remain strong.
“Despite the previous statement, cattle prices received will still be ‘strong’ if they decline on the futures market,” he says.
