Cattle futures trade on Tuesday seemed to be mostly a game of wait and see with traders having no compelling reason to stake a definitive claim on either side of the fence.
Live Cattle futures closed narrowly mixed (30¢ lower to 27¢ higher).
Feeder Cattle futures closed narrowly mixed but mostly marginally higher (40¢ lower to 22¢ higher).
Choice boxed beef cutout value was 88¢ lower on Tuesday afternoon at $207.36/cwt. Select was 84¢ lower at $203.13.
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Major U.S. financial indices settled slightly higher on Tuesday, hinting at some stability, at least for the day. No doubt, investors will look to Wednesday morning’s release of the monthly Consumer Price Index for further hints about inflation.
The Dow Jones Industrial Average closed 39 points higher. The S&P 500 closed 6 points higher. The NASDAQ closed 31 points higher.
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“Changes in where consumers buy groceries, when they buy, and what they buy will inevitably force changes all the way through the supply chain. Nowhere will these changes be more dramatic than in perishables such as meat,” says Don Close, RaboResearch Food & Agribusiness Senior Protein Analyst.
The where in this case is online, versus brick and mortar stores.
Close recently authored an in-depth report—Food Fight, Online and Brick & Mortar Battle for Business—exploring the swift transition some consumers are making to purchase their food online, and what that means to beef, specifically.
The report projects 20% of food purchased for in-home consumption will be purchased online by 2025. For perspective, Close says total domestic annual food sales are currently around $1.5 trillion; approximately half of that is for in-home consumption.
Close notes that access to a broader pool of customers, independent of geography, provides online shopping outlets with the ability to meet a wider variety of customer requests than brick and mortar stores. As examples, he mentions the opportunity for customers to buy specific beef grades and brands.
Think your way through that and a broader pool of customers for beef with narrower specifications likely provides incentive for suppliers to further segregate beef, expanding value and price differences.
“These niche desires will result in additional demands on cattle quality and production specifications, which will lead to a wider price spread across all classes of cattle, as well as a more detailed premium and discount schedule,” Close says. “These changes are indicative of a permanent change in the way food reaches the average American consumer—and if the beef industry is to ward off any further decline in beef consumption, it must embrace these changes and make beef an integral part of the consumption experience, regardless of where it is purchased.”