US beef prices drop as foodservice demand dwindles
The majority of US State governments have ordered the closure of restaurants, hotels and other foodservice outlets to reduce the spread of the coronavirus. With the addition of school closures, demand from foodservice has dissipated as consumption switches to in-home. According to Rabobank estimates, every 10% drop in out-of-home spending is equivalent to an additional 3% in retail food spending.
The US beef market has been heavily affected by the slowdown in foodservice. Reports suggest that for the most part, product originally destined for foodservice could be redistributed amongst retail channels. Even so, the cattle market remains challenging.
At a retail level, beef benefitted from the surge in demand as consumers stockpiled goods. However, retail demand is now thought to have stabilised. Meat companies are reportedly reducing ranges, focusing on cheaper commodity items to fulfil retail demand.
Looking ahead, there are concerns that rising unemployment will limit consumer spending. This will likely affect more premium cuts and value-added products in particular.
At a processor level, there have been a few individual cases of the virus at plants. Notably, JBS announced it would be reducing beef production for two weeks at its Pennsylvania plant as a precaution. More widely, employee absenteeism in processing plants has increased.
By Felicity Rusk
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