Christmas Roast

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The beef retail activity index during the three weeks prior to Christmas averaged 3.4 percent above the already very strong performance a year ago and 9 percent higher than the five year average. 


The beef cutout outperformed the pork cutout towards the end of December and we think this is due, in part, on stronger beef demand at retail. Seasonally beef demand gets better in December as foodservice business gets a bump from Christmas parties and year end celebrations. This year, however, it appears that retailers also increased their beef features, helping support wholesale beef prices despite some of the largest slaughter weeks of the year. Indeed, one can argue that the big slaughter weeks were possible precisely because packers needed to fill orders and were very aggressive in pulling cattle from feedlots.

The beef retail activity index during the three weeks prior to Christmas averaged 3.4 percent above the already very strong performance a year ago and 9 percent higher than the five year average. The chart shows retail feature activity index for beef ribs, a staple of year end celebrations. Rib roasts are a favorite item for that time of year and as usual we saw a big jump in retail features. Rib retail features were 9.2 percent higher than the previous year and 11 percent higher than the five year average. The beef loin retail activity index during these three weeks was about 4 percent higher than a year ago as well but lower than the five year average. Even ground beef saw an improvement in December, especially during the first two weeks of the month. Retail ground beef features in the first two weeks of December averaged 24 percent above year ago levels and 14 percent higher than the five year average. For the entire month of December retail ground beef features were up 14 percent compared to last year. Retail merchandisers have a number feature options for the period between Thanksgiving and Christmas, with pork chops traditionally a popular one. Consider the second chart shown. In 2016 and prior years (five year average), we notice a bump in terms of pork loin features during this time of year. Featuring pork chops between the two big holidays appeared to be a good, inexpensive option and it helped clean up the pork loin supply during some of the biggest hog slaughter weeks of the year. This was not the case last year and it was not the case this year. Pork loin retail feature activity in the first two weeks of December was 5 percent lower than a year ago and 25 percent lower than the five year average. And remember that this was a time when pork production hit all time record levels. For the entire month of December pork loin retail features were 11 percent lower than a year ago and 24 percent lower than the five year average. With fewer retail features and record production it should not be much surprise that pork loin prices have struggled. The loin primal value in December averaged $65.13/cwt, 11 percent lower than a year ago and 19  percent lower than the five year average. The lower year to year value of the loin primal removed about $2 from the overall pork cutout in December.

 It remains to be seen how the loin primal will perform in January. Last year loin features were very weak but eventually retailers changed their strategy and featured loins more prominently in February. Will they do the same again this year? February futures are pricing extremely weak pork prices in the first two months of the year. This is partly due to the ongoing woes of the loin primal but also weak ham and pork trim values. Jan/Feb slaughter should be lower than December levels, which should help limit supplies coming to market. But what is also needed is more retailers looking to take advantage of the value currently available in the pork market.

– Daily Livestock Report