US - Below are items that we found interesting as we looked through the numbers, report the Steiner Consulting Group, DLR Division, Inc.
The rally in the value of the beef cutout has been particularly impressive. The key drivers for the higher beef prices: steaks and ground beef. The value of the loin has increased sharply. This is in part due to the seasonal improvement in foodservice business but also a more positive economic climate (low unemployment, higher incomes etc).
One challenge for foodservice operators has been the seeming disconnect between fed cattle values and the price of beef that restaurants are expected to pay. After all, foodservice operators are a classic short since they have to print restaurant menus and budget accordingly. Last fall cattle futures were pricing April cattle at under $100/cwt, implying significant cost deflation for a number of key steak items.
So far the expectation for double-digit cost decreases have not materialized and some end users are scrambling to cover their short position. Add to this increased participation on the part of retailers in featuring beef and the choice cutout is now nearing $220/cwt, a $30 gain in four weeks, with $22 of that gain coming from higher rib and loin values.
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