CHICAGO: Beef is red hot – for now.
US wholesale prices for the premium protein leapt the most since in over two years on Monday as coronavirus-fearing consumers cleaned out meat cases at grocery stores in bouts of frenzied buying.
The effect may be temporary as restaurant closures begin eating into demand for steaks and other pricey items.
Cheaper cuts like rounds and chuck that end up in retail stores were behind Monday’s gains, said Altin Kalo, an analyst at Steiner Consulting Group. Wholesale beef rose 7.8% to US$2.2436 a pound Monday, data from the US Agriculture Department show.
The cattle futures market surged after USDA showed higher beef prices. However, April live cattle futures closed 3.9% lower as broad jitters about demand and economic growth continued to weigh.
“Consumers have gone there and cleaned out all the meat cases, and you need to refill them, so there’s a scramble to get product,” Kalo said.
Meat prices rise as coronavirus buying depletes supply
While restaurant closures across the US are negative for beef, their effects won’t come into play for weeks. Meanwhile retail demand is immediate, said Kalo.
Food-service shutdowns will have a disproportionate impact on more expensive cuts of beef, like prime steaks, said Alan Brugler, president of Brugler Marketing & Management LLC.
Wholesale buyers may also be stocking up because they’re concerned about virus-induced labour shortages at plants, which could lead to a sudden reduction in the amount of beef coming onto the market.
Just last year, a fire at a single Tyson Foods Inc beef processing plant caused shortages of packed meat and an oversupply of live animals.
A buying frenzy ensued among retailers, while producers faced depressed prices for their market-ready animals.
Tyson warned on Friday that the coronavirus outbreak could be a risk factor for earnings, saying quarantine measures may depress demand for protein.
Brazil prices fall
Meanwhile, the Brazilian cattle market is taking a hit, with local prices dropping to a four-month low.
On top of global demand concerns, a shift for Brazilian dining toward mostly home-based meals has also increased consumption woes, according to Thiago de Carvalho, a researcher at Cepea, the research arm at Sao Paulo University.
In the US cash market, live cattle prices have dropped to the lowest for the season since 2010 at US$1.0598 a pound.
Supply chain disruptions could lead to prices testing recession-era lows of 80 cents a pound, according to Craig Turner, senior commodities broker with Daniels Trading in Chicago.