Demand for Choice beef causes supply ripples

by Meat&Poultry Staff
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WOOSTER, Ohio – The price gap between Select grade boxed beef and Choice grade or better is greatly impacted by supply and demand. Recent shifts in merchandising resulted in more high-quality beef in the market as supplies began to shrink. Demand increased significantly leading up to Wal-mart Stores Inc. officials announcing it would sell Choice-grade beef at all of its 3,800 US stores this past month.

Asked by Laura Nelson, industry information specialist for Certified Angus Beef, to comment on implications of this trend, JBS USA officers said Choice beef supplies had experienced price increases not much more above the price of Select beef. This trend helped sway marketers into offering better beef to millions of US shoppers up until recently. -- Now the wider price spread is signaling beef producers to boost their supply.

The retail channel, in particular, is making more impact than it has in the past on the spread, said Tyler Brown, premium program manager for JBS. That is historically driven by foodservice, but today’s retailers want to offer more quality and consistency. “They’re looking at higher grading programs to do that,” he added.

As buying increased for more restaurant-quality beef, cattlemen were more careful when it came to optimizing marbling. JBS senior vice president of sales Al Byers said this fall could experience a very tight supply situation, particularly for premium Choice programs.

Today’s consumers want more value for their money and JBS customers are responding, Brown said.

Opportunities for retailers to satisfy this demand is still growing, which is good news for US cattlemen. “When you deliver something they’re looking for with exceptional value, which is defined in the price paid for quality, you’ll usually get rewarded for it,” Brown said.

The Choice/Select spread is the basis of grid marketing. After increasing to near-term highs of more than $20 per hundredweight this fall, beef packers predict the spread may stabilize between there and $12. Money drives everything in this industry, Brown said. “The spread speaks for itself and the prevalence of black cattle and Angus-influenced genetics continuing to increase,” he added.

An increasing number of US retailers who used to offer Select beef only have upgraded some of the meat case to a higher-quality product. But variety is maintained through more choices in the case. Byers said retailers, as well as packers, are beginning to understand that a beef-eating solution must be provided to meet the social demographics of each consumer who walks into the store.

US beef packers will be challenged to meet demand as supplies of premium Choice beef tighten up through the holiday season, Byers said. “Certainly, we’re encouraging anybody from the feedlot to the stocker and rancher to keep sending us high-quality cattle. We’ll find a home for it,” he concluded.

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