Beef Prices Explained

Ample supply to the global market and decreasing demand from its top exporting market caused the downward beef prices trend. Canada (12.8%), Brazil (24.8%), and Australia (112.9%) beef imports increase due to the high slaughter rate. Also, Europe posted healthy production as the region recorded a 2% output increase.

While the U.S. production contracted slightly, the country’s demand couldn’t accommodate the current inventory, resulting in subdued beef prices.

Why are beef prices fluctuating?

1. Demand

The domestic demand for beef, especially for higher-end cuts, comes under pressure as consumers struggle with inflation. The number one price mover in all commodities finds cheaper protein sources. These alternative meats are chicken and ground beef.

Thus, resulting in the decrease of ribeye and beef loin prices. Additionally, 92% of Americans (the second-largest beef consumer) cut back on their non-essential spending due to the increasing commodity prices. Overall, this weaker demand from consumers influences beef prices greatly.

2. Chinese Market

The world’s top beef importer by 30% lowers its red meat consumption. China disappointed Brazil’s (the world’s top beef exporter) expectations as beef prices in the Chinese market fell to almost $10 per kilo. Beef profitability is quite low as the country currently battles deflation and the Chinese Consumer Price Index decreased by 0.3%. Thus, this worrying economic situation adds weight to the decreasing beef prices.

3. Cattle Production

Beef prices largely depend on its production too. The last 2 years seemed hard for ranchers as cattle plains experienced severe drought which affected cow’s diets due to the low availability of hay stocks and the decrease in water volume. This year is an improvement as the U.S Drought Monitor notes that less than 24% of the country is under drought conditions.

Additionally, the easing of the extreme weather system in Brazil helped its cattle productivity. The country records its 33% increase in slaughter rate as the government improved its management techniques in herding cows. Overall, this increased production contributes to the balancing of global demand and ultimately, to beef prices.

Which variables impact the price of beef?

• Demand
• Chinese Market
• Cattle Production
• Weather Systems
• Government Policies
• Disease Outbreaks

Where does beef come from?

Generally, the highest quality of beef comes from cattle that are slaughtered under 36 months of age. Beef processing involves converting live cattle into beef products that are safe and ready to eat. It includes several steps, from slaughter to fabrication to packaging.

1. Slaughter – The first step in beef processing is slaughter. According to government regulations, this is done humanely. The animal is first stunned to make it unconscious and slit its throat to bleed out.

2. Skinning and Evisceration – Once the animal is dead, the skinning and eviscerating proceed. This involves removing the hide, internal organs, and head. And the carcass is washed to remove any blood.

3. Chilling – After washing, the carcass goes into the chiller with a temperature of below 40 degrees Fahrenheit. This method helps to slow down the growth of bacteria and preserve the quality of the meat.

4. Manufacturing – The carcass is manufactured into primal cuts such as the chuck, round, loin, and rib. Additionally, primal cuts are further manufactured into subprime cuts such as steaks, roasts, and ground beef.

5. Packaging – The final product is packaged according to its size, property, and quality. Packaging types depend on the company’s sustainable guidelines. It can be sealed, wrapped in butcher paper, or placed in plastic trays.

6. Inspection – Throughout the processing process, a series of inspections by government officials are conducted to ensure that it is safe and wholesome for consumption.

Once approved, the beef grading process follows. This includes evaluating the quality of beef carcasses, usually done by expert health inspectors who assess two main factors: marbling and maturity. Marbling is the amount of fat interspersed within the lean muscle of the beef. It is a good indicator of tenderness, juiciness, and flavor.

Maturity is the age of the animal at slaughter. Younger animals tend to have more tender and juicy meat. The inspector assigns beef carcasses to these grades:

Prime beef is the highest grade of beef. It is from young, well-fed cattle and has abundant marbling. The prime beef’s quality is tender, juicy, and flavorful.

Choice beef is the second-highest grade of beef. This comes from young, well-fed cattle but has less marbling than Prime beef. The meat’s quality is tender and juicy thus, good for making money.

Select beef, the third-highest grade of beef. Its meat quality is less tender and juicy since it comes from older or less-feed cattle.

Standard and Commercial beef are lower grades of beef and are typically used for processed meats or ground beef.

Utility, Cutter, and Canner beef, the lowest grades of beef. Their meat qualities don’t meet for human consumption so they are used for animal feed or other non-food products.

Nowadays, our favorite steaks and burgers come from these top producers: The United States, Brazil, the European Union, China, and India.

What is the future price of beef?

Inflation and low demand from top country importers dominate the bearish beef prices. However, several present and future figures have the potential to point their future prices in a tailwind or headwind direction.

Beef prices spike during summer and the onset of holidays as consumers stock red meat for various celebrations such as New Year’s Day, Christmas Day, and Lunar New Year’s Day. Also, the frequent appearance of animal diseases, like BVL (Bovine Leukemia Disease) can create a spike in its prices. For instance, the transmission of H5N1 avian influenza to dairy cattle in the U.S. and the Brazilian food-and-mouth disease (which the country cleared without vaccination) will likely affect the red meat industry.

On the other hand, the growing demand for climate disclosure is one of the many market restraints as the production of this commodity belongs to the scope 3 supply chain emissions. This requires growers to respond to new sustainability requirements and capitalize on associated opportunities. 

Additionally, the volatility of weather systems due to global warming will largely affect cattle herders and eventually their production. Thus, meat market analysts expect a modest beef price in 2030 at $17.06 per kilo.