Go ahead, throw another T-bone on the grill. Thanks to a boom in beef production, steaks and burgers will finally be cheap enough this summer to rival pork and chicken.
The surge in output means the U.S. is headed for a meat bonanza. Americans will eat 8 percent more red meat and poultry per capita this year compared with three years earlier — a record jump in government data going back to 1970. Beef, in particular, is expected to see increased consumer demand as prices in grocery stores drop, making the meat more competitive.
Retailers and restaurants are loading up on beef supplies, signaling that customers will enjoy summer promotions. Adding to the demand outlook is recent news that the U.S. may be getting closer to restarting trade with China, the world's second biggest beef buyer, opening a market that has been shut since 2003. The brightening picture is drawing the attention of hedge funds, who have the most bullish holding on cattle futures since June 2014.
"If you lower prices enough, you can get products sold not just in the near term, but for the next three to five months," said Altin Kalo, an analyst at Manchester, N.H.-based Steiner Consulting Group, an economic and commodity-trading adviser. "For two or three years we were in a situation where beef went up and up, and it became difficult to run full promotions. Suddenly, the market switched and allowed more operators to do that."
Rising beef consumption is sparking a rally for cattle prices, as traders anticipate that meatpackers will need a steady stream of the animals. June futures climbed 2.6 percent to $1.147 a pound last week on the Chicago Mercantile Exchange, after reaching $1.15525, the highest since the contract started trading in February 2016. They are up 3.4 percent this month.
Money managers are gearing up for more gains. The cattle net-long position, or the difference between bets on a price increase and wagers on a decline, climbed 1.9 percent to 123,372 futures and options in the week ended April 11, according to U.S. Commodity Futures and Trading Commission data released three days later.
Demand is picking up as retailers have responded to better wholesale pricing with "aggressive" beef promotions, analysts at Greenwood Village, Colo.-based CoBank said in a March report. Beef is seeing its highest share of total advertisements for the three main meats, including chicken and pork, in seven years, CoBank said.
Ground beef in grocery stores has dropped about 9 percent from a year ago, the most recent data from the U.S. Bureau of Labor Statistics show. Steaks are down 6.6 percent.
While pork and chicken are typically less expensive than beef, the gap between the prices is narrowing. Steak's premium over pork chops is down 6.5 percent from a year ago.
Above-average temperatures, favorable to grilling, and strengthening consumer confidence are also helping demand.