July Meat Market Update

It appears there may be a beacon of light at the end of a very long and dark tunnel known as meat prices.

As restaurants have begun reopening and with America’s grilling and barbecue season in full swing, pent up demand has upended the beef and pork pricing markets.

Futures contracts on ready for slaughter cattle have shot up 27% in the last year and 40% since March. While elevated demand is bringing on new supply, it can’t come quickly enough.

Sizzling demand isn’t the only factor at play though. Grocers, small ranchers and some members of Congress are alleging that the four biggest meatpacking companies, three of which are US based, have colluded to tamp down the supply, keeping market prices artificially high.

Cargill, a meat processor and America’s largest privately held company, is making as much as 20 times the normal profit margin per cattle head, according to RaboResearch. Even compared to past periods of pricey product, Cargill’s margins are still elevated by a factor of 6.

Antitrust pressure is mounting, including from a DOJ probe of the big 4’s potential anticompetitive practices. These companies have recently shown signs of investing in supply expansion. US based National Beef is expanding an Iowa based plant and Brazil’s JBS Swift is investing hundreds of million of dollars in higher wages and more robust facilities, per a recent report by the NY Times.

The final factor lending optimism to the prospect of a return to normalcy is the labor factor. As unemployment surplus checks have been discontinued in several states, workers have been forced to return to the workplace helping to ease labor shortages. More workers mean more production hours, more production hours mean increased supply and increased supply means we have a real shot of relief on the horizon.

Call a Classic sales representative today to check on availability!