Explore Topics and Trends impacting today's markets

The coronavirus pandemic sparked a boom for meat retailers like Brett Joseph. With steakhouses and other restaurants shuttered much of last year, Americans snapped up steaks, burgers, ribs and other cuts to grill and serve at home. Sales at Joseph’s store, Wheaton Meat Co., soared 50% in 2020, he said, prompting Joseph to hire more workers and extend store hours to keep pace with demand.

That’s not to say 2020 was a walk in the park, Joseph said. Retailers, feedlot owners and others in the industry endured turbulence in the marketplace as COVID-19 outbreaks caused slaughterhouse shutdowns, supply disruptions and volatility in cattle and beef prices. Often, it was a struggle to gauge just where beef prices should be and how to communicate that to customers, Joseph said.

Beef prices would change abruptly, “and you don’t really have an explanation for the customer,” said Joseph, whose store is in Wheaton, Illinois, a Chicago suburb. “Prices were going up and down much faster than usual. We had to make adjustments on the fly. If you didn’t adjust, you might lose business.”

Joseph, like others in the beef industry, watches the U.S. Department of Agriculture’s daily boxed-beef price report, a long-standing wholesale benchmark. But he and others in the beef industry agreed that the boxed beef price by itself isn’t always efficient for ascertaining market conditions or direction, and it’s time for an update.

Pandemic Drives up Cattle Market Volatility

Cattle and beef, like many commodity markets, can be volatile and at the mercy of weather, geopolitics and other factors that are difficult to predict or manage. But the pandemic took things up a notch, beef industry analysts said.

As the pandemic escalated last winter and spring, packing plant shutdowns led to temporary shortages and empty meat shelves at some grocery stores. CME live cattle futures tumbled over 40% from the start of 2020, touching a 14-year low at about 76 cents a pound in April 2020. Wholesale beef prices went the opposite direction, with the boxed beef cutout surging in May to all-time highs above $475 per hundred pounds, more than double levels at the beginning of the year.

The past year was “the most volatile, tumultuous period for the beef industry I’ve seen in 45 years,” said Don Close, Senior Vice President of Livestock Research at Rabobank.

Pandemic disruptions exacted a particularly harsh toll on U.S. cattle feeders, who had thousands of animals ready for the slaughterhouse last spring but nowhere to send them. By the start of the second half of 2020, about 500,000 head of slaughter-ready cattle were “backed up” in feedlots, Close estimated. By the fourth quarter, the backlog swelled to 1 million head.

The excess supplies weighed on live cattle prices, resulting in abnormally wide “spreads” with wholesale benchmarks and steep losses for many feedlot owners. A rally in prices for corn, a primary cattle feed ingredient, added to feedlots’ pain, Close said.

The past year was “the most volatile, tumultuous period for the beef industry I’ve seen in 45 years.” 

— Don Close, Senior Vice President of Livestock Research at Rabobank

Cattle prices have mostly recovered from the lows of 2020, but lessons from the past year endure. For one, U.S. beef producers are generating the best quality product they ever have, thanks to improvements in feed and genetics, said Jim Sullivan, CME Group’s Director of Commodity Research and Product Development. More than 80% of U.S. beef is graded “Choice,” or “Prime”, the highest grade, Sullivan also said.

“The increase in beef quality is nothing short of remarkable over the last five years. Choice beef is now the standard while Select has declined and Prime has increased,” Sullivan said. “At one time, you could only get prime beef at high-end steakhouses, never at a grocery store. That’s changed.”

Another lesson: Consumers want their beef, whether they’re dining out or at home. Beef sales at U.S. grocery stores and other retail outlets totaled $34.5 billion during the 52 weeks through the end of February, up 26% from the same period a year earlier, according to NielsenIQ.

The dining-at-home wave has also been a feast for online meat retailers like Omaha Steaks. Sales of Omaha Steaks’ filet mignon, for example, jumped 70 percent in 2020 from 2019, according to Becky Niiya, the company’s Director of Public Relations. Omaha Steaks’ customers bought almost 20 times as much ground beef by weight in 2020 versus 2019.

“Throughout the pandemic, many of our customers having been buying in bulk to save money, stretch the household budget and provide them with the peace of mind of having a full freezer,” Niiya said in an email.

“The increase in beef quality is nothing short of remarkable over the last five years. Choice beef is now the standard while Select has declined and Prime has increased."

— Jim Sullivan, Director of Commodity Research and Product Development at CME Group

Pricing Beef, Not Cattle

Supply and demand patterns of recent years underscore the need for new pricing tools for the cattle industry, similar to what the pork industry did several years ago, said John Nalivka, owner and president of Sterling Marketing Inc., a Vale, Oregon-based consultant. That requires less emphasis on live, slaughter-ready animals and more emphasis on the carcass and the cuts of beef that ultimately end up on consumers’ plates.

That’s the rationale behind CME Group’s new Boxed Beef Index, which launched March 8. The index, which tracks the previous five days’ prices for Choice and Select grade beef sold on spot markets, aims to provide a better pricing tool for businesses across the beef supply chain.

A viable, boxed-beef index that properly reflects value and supply-demand dynamics, is essential to the long-term success of the beef industry, Nalivka said.

“With a boxed beef cutout index, you could increase market activity against a more widely-reported benchmark,” Nalivka said. A well-constructed beef index “ties the producer and consumer more closely, and I firmly believe that’s where the industry needs to move, from a demand standpoint. If you’re producing the right cattle for the right market, you will be rewarded.”

Sullivan said the CME Boxed Beef Index is “closely correlated” (at about 99 percent) with USDA wholesale beef benchmarks, including the agency’s national weekly beef comprehensive cutout report. The index “should have applications for everyone in the beef industry, particularly for people farther down the supply chain, including wholesalers and retailers,” Sullivan said.

Joseph, of Wheaton Meat, said he’s hopeful his industry has weathered the worst of the pandemic and is optimistic customers will continue to belly up for quality beef. In early March, his store’s promotions included 8-ounce beef patties for $4.99 a pound, all-beef franks for $5.99 a pound and, just in time for St. Patrick’s Day, “the best corned beef in the world,” at $7.99 a pound, according to the Wheaton Meat website.

“Everybody’s cooking and eating at home now, and not just meat,” Joseph said. In terms of supply and prices, “it’s been a very tricky environment. You always want more transparency. The more the consumer knows, the better. The more information, the better.”



OpenMarkets is an online magazine and blog focused on global markets and economic trends. It combines feature articles, news briefs and videos with contributions from leaders in business, finance and economics in an interactive forum designed to foster conversation around the issues and ideas shaping our industry.

All examples are hypothetical interpretations of situations and are used for explanation purposes only. The views expressed in OpenMarkets articles reflect solely those of their respective authors and not necessarily those of CME Group or its affiliated institutions. OpenMarkets and the information herein should not be considered investment advice or the results of actual market experience. Neither futures trading nor swaps trading are suitable for all investors, and each involves the risk of loss. Swaps trading should only be undertaken by investors who are Eligible Contract Participants (ECPs) within the meaning of Section 1a(18) of the Commodity Exchange Act. Futures and swaps each are leveraged investments and, because only a percentage of a contract’s value is required to trade, it is possible to lose more than the amount of money deposited for either a futures or swaps position. Therefore, traders should only use funds that they can afford to lose without affecting their lifestyles and only a portion of those funds should be devoted to any one trade because traders cannot expect to profit on every trade. BrokerTec Americas LLC (“BAL”) is a registered broker-dealer with the U.S. Securities and Exchange Commission, is a member of the Financial Industry Regulatory Authority, Inc. (www.FINRA.org), and is a member of the Securities Investor Protection Corporation (www.SIPC.org). BAL does not provide services to private or retail customers.. In the United Kingdom, BrokerTec Europe Limited is authorised and regulated by the Financial Conduct Authority. CME Amsterdam B.V. is regulated in the Netherlands by the Dutch Authority for the Financial Markets (AFM) (www.AFM.nl). CME Investment Firm B.V. is also incorporated in the Netherlands and regulated by the Dutch Authority for the Financial Markets (AFM), as well as the Central Bank of the Netherlands (DNB).

©2023 CME Group Inc. All rights reserved