Current “Lopsided” Cattle Market Indicative of Forward Contracting

WASHINGTON, DC – This global pandemic has injected never-before-seen uncertainty into the cattle and beef markets. As consumers were emptying meat cases, the boxed beef cutout rose to historic levels, and cattle futures zigged and zagged as far as they could in both directions, while cash markets gyrated wildly. According to the American Farm Bureau Federation (AFBF), with expectations of record-setting meat and poultry production in the U.S. this year, there is no shortage of meat. The current problem is a logistical one and, in the future, the expectation is for a demanding challenge. AFBF economists explain that on a typical day, a retailer is not going to be able to order more meat for delivery the next day. The meat that retailers sell is typically what they started planning sales around as many as three months before. In many cases, retailers purchased the product up to six weeks earlier and there is not a large volume of “unspoken for” meat in the market on a typical day. The spike in the cutout is partly driven by a surge in demand as retailers look to refill their meat case, increasing competition for the small share of “unspoken for” meat. Because much of the meat delivered to grocery stores last week had been sold weeks or months earlier, less of it was valued at these historic cutout prices.