Demand vs. Inflation: So far, consumers continue to buy beef at record prices
WASHINGTON, D.C. – As always, there is a great deal of dynamics across various beef product markets. However, beef demand appears to be generally steady and strong at the end of 2022.
That’s according to Darrell Peel, Oklahoma State Extension Livestock Economist. Beef demand considers retail beef prices as well as the quantity of beef consumption. Total commercial beef production is projected for 2022 at a record level of 28.3 billion pounds. After adjusting for beef trade, per capita retail beef consumption is projected at 59.3 pounds, up year over year from 58.9 pounds per capita in 2021. The fact that retail beef prices this year are averaging higher at the same time as consumption is increasing is an indication of strong beef demand.
The all-fresh retail beef price in October was $7.25/lb., down slightly from $7.32/lb. in September and down 4.0 percent from the record high of $7.55/lb. one year ago. In 2022, the all-fresh retail beef price has remained in a narrow range from $7.37/lb. to $7.25/lb. and has averaged $7.33/lb. through October, up from the 2021 annual average of $6.95/lb. Figure 1 includes all-fresh retail beef prices since January 2018 and shows the sharp increase in prices in 2021 and steady prices thus far in 2022.
Wholesale boxed beef prices, similar to retail prices, have traded in a narrow range for most of 2022. Since March, Choice boxed beef has averaged $261.77/cwt. with a weekly maximum of 272.48/cwt. and a minimum of $246.31/cwt. leading to a range of $26.17/cwt. This follows very strong wholesale demand in 2021 which led to an average Choice boxed beef price of $279.81/cwt. with a weekly maximum of $347.02/cwt., a minimum of $206.73/cwt. and a range of $140.29/cwt. for the year.
So far in 2022, Choice boxed beef prices reached a low for the year in October of $246.31/cwt. and have increased to over $263/cwt. in the most recent two weeks. Prices for numerous wholesale cuts have increased including the tenderloin at $15.06/lb., up nearly 38 percent from the August low and now 12 percent higher than year ago levels. This is the highest wholesale tenderloin price since September 2021. Wholesale ribeye prices normally increase in the fall ahead of holiday demand for Prime Rib, and recently reached $10.23/lb., the first time over $10/lb. since last year. Current ribeye prices are up nearly 23 percent from the summer low.
In addition to the middle meats discussed above, wholesale prices have increased recently for chuck rolls, mock tender, chuck flap and eye of round. Other products continue to have weak or lackluster prices including tri-tip, bottom sirloin flap and flank steak. Wholesale brisket prices have been mostly steady this year, averaging $5.86/lb. after surging to record high levels of $8.00/lb. in the summer of 2021. Wholesale ground beef prices have dropped about 10 percent since the end of summer grilling season in September. There is constant jockeying in wholesale product values due to the dynamics of domestic and international beef demand. However, beef demand appears to be generally steady and strong at the end of 2022.
Beef production is expected to decrease sharply in 2023, which will lead to higher beef prices and more beef product market dynamics. As beef supplies tighten, some consumers may begin to “trade down” as market prices ration a smaller supply of beef. Per capita beef consumption is expected to decrease in the coming year, not because beef demand is weak but simply because the available supply of beef will decrease.