Fresh ground beef has become less competitive at retail because of tight supplies.

Weakened sales in the ground beef market keep analysts guessing.

Something is amiss with the US beefiness industry'southward most ubiquitous production, basis beef. Sales have been weaker than expected for 18 months. That's of deepening business organisation because ground beefiness as hamburgers and in all its forms is by far the virtually widely purchased beef item in the US at both the retail and foodservice segments.

Recent information reveal how important the product is.

Ground beef currently accounts for 55 percent of all beef sales in the United states, with its sales divided 50/50 betwixt the retail and the foodservice sectors.

At retail, consumers buy twice every bit much ground beefiness as any other beefiness item. It accounts for 49 percentage of total retail beef sales volumes and 39 percent of revenue.

At foodservice, footing beef accounts for 63 percent of volume and 37 percent of revenue.

Hamburgers account for nearly 30 percent of total ground beef use. Non surprisingly, three of the superlative 5 restaurant chains in the Us are hamburger chains. Of the 400 largest restaurant chains in the US, hamburger bondage business relationship for 33 percent of total sales dollars.

This level of consumption means manufacturing boneless beef, the raw production used to make basis beef, is past far the largest single product at the wholesale level. It accounts for approximately half the total annual beef supply when both domestic and imported sources are combined. The majority of this manufacturing beef is processed into a number of ground beef products.

This market dominance makes the ground beef processing manufacture arguably the nigh pregnant sector of the US meat and poultry industry. Information technology is certainly one of the largest sectors in terms of production volumes of a single meat category. The footing beef processing sector is dominated by a handful of major companies, reflecting consolidation in the meat processing manufacture over the past 15 years.

Dividing the market

Footing beefiness processors autumn into two groups. The first is those companies (packers) that primarily slaughter and process fed and non-fed cattle and are also major producers of ground beefiness. The second group is those companies (grinders) that purchase supplies of manufacturing beef, both domestic and imported product, and further process that raw material into a diverseness of products for finish users.

This differentiation betwixt packers and grinders is clearly seen in the types of products that various companies make. In general, packers specialize in producing and selling fibroid and fine grind chubs (fresh) for retail customers, with a smaller amount of the same product going to foodservice. Grinders specialize in producing individually quick frozen (IQF) patties for utilize primarily in the foodservice sector. Based on historical information from the top ten basis beefiness processors, the fresh chub category is by far the largest in the industry. Nearly three times more of this product is manufactured than IQF patties. The next 2 categories, case ready (MAP) and fresh patties, are only half the size of the 2nd category.

NPD Group lists the top uses of ground beef.

Traditional ground beef products such as fresh ground beef for retail sale and private quick-frozen patties for foodservice sale dominate the marketplace.

Americans savour ground beefiness in numerous forms. The top uses of ground beef equally a percentage of basis beef servings, co-ordinate to market research data, are hamburgers (29 percent), spaghetti (xiv pct), Mexican dishes (9 percent) and casseroles/helpers (8 per centum).

These data, plus a breakdown of product type manufactured past major ground beef processors, suggest that traditional basis beef products such as fresh ground beef for retail sale and IQF patties for foodservice sale dominate the market.

A relatively new category, instance fix (MAP), appeared in the early on 2000s in response to retailers' desires to movement away from producing fresh ground beef in-business firm. This desire was motivated by food safety concerns, a focus on more consistent production quality through centralized processing, consumer convenience, retail labor shortages, efforts to reduce product compress and loss of out-of-stock sales, and other factors. Recent record-keeping requirements introduced by the US Dept. of Agriculture will probable increase the utilise of example-fix or MAP ground beef by retailers.

The price was right

Ground beef has too been the beef manufacture's most of import production for many years due to price. Fresh footing beef at retail consistently was competitively priced with pork and craven items. Patty prices at the foodservice level allowed hamburger chains to dominate the eating place industry.

However, fresh basis beef at retail began to become less competitive as supplies of domestic lean manufacturing beef (90CL) began to tighten in 2013-2014. Most retailers sell only fresh footing beef. So the vast bulk of frozen imported 90CL beef from Australia, New Zealand and other countries goes into foodservice.

The wholesale price of domestic 90CL began 2012 at new tape levels, ranging from $220 to $230 per cwt. Just the toll cruel back in 2013 and some weeks averaged below $200, every bit beef cows connected to stampede to market due to the effects of drought. That supply began to shrink though in 2014 and the price of 90CL consistently reached new record levels. The first week of September 2014 saw the price exceed $300 per cwt for the starting time time. Prices backed off somewhat for several months merely and then posted the current record of $303.51 at the end of January last year.

In response, retailers began raising prices on all their fresh ground beef offerings and featuring ground beef less in early on 2014. The result was that the boilerplate price of all ground beef, equally reported by USDA, exceeded $4 per lb. for the first time ever in August 2014. Retail footing beef sales began to soften later that. Average prices peaked in Feb terminal year and have gradually declined. Just they remain higher up $4 and ground beef thus remains expensive compared to pork and craven.

Meanwhile, the increase in the price of 90CL and an abundant supply of pork and chicken also caused hamburger chains and other quick-service restaurants to diversify their menus abroad from beef.

A breakup of retail ground beef categories in 2015 reveals that the only category priced below $four was the lxx-77 percent lean category. Its price averaged $3.91. Information technology was no surprise that sales dominated at $1.4077 billion, with book sold at 1.044 billion lbs. Next is the 78-84 percent lean category with an average price of $4.07, with sales of $2.445 billion and volume of 600.4 million lbs. The 90-95 pct lean category was third with sales at $i.987 billion. It sold only 381 million lbs. but its average price was $5.21. The leanest category (96-100 percent) had an average price of $6.31.

Retailers featured ground beef aggressively this Jan, with feature prices at $i.99 per lb. for the first time in several years. Average characteristic prices of the main categories were all downward sharply from the year before. The price of 70-79 percent lean was downward 21 per centum, the price of 80-89 per centum lean was down 16 percent, the price of ground chuck was downward 12 percent and the cost of 90 per centum plus lean was down 13 percent. Despite this, retailers say sales were disappointing and have connected to exist soft since then.

Ground beef is a staple in the diet of most US consumers.

"Ground beef is a staple in the diet of virtually United states consumers and nosotros've recently seen encouraging trends, including a resurgence for premium gourmet burgers." — John Keating, president, Cargill Beefiness

'Go-to' protein

Theories abound as to why retail ground beef sales are performing poorly compared to years by. One is that consumers became a trivial tired of footing beefiness after having to trade downwards to it from more expensive beef items during the 2009-2010 recession. They began to consume more than pork and chicken, particularly as their production increased and thus became much cheaper than beef. Ground beefiness was no longer consumers' "become-to" protein, even in hamburger form, analysts say.

Pork production in 2015 exceeded that of beefiness production for the offset time (24.488 billion lbs. versus 23.700 billion lbs.). Chicken was far ahead at 40.085 billion lbs. Forecasts are for beef product to increase 3 percentage or more this year. But pork production might increase another 2.5 percent, as might craven production. So beef will remain tertiary in terms of production.

It is becoming increasingly clear that pork and poultry are the proteins that compete primarily with ground beef, non beefiness whole muscle cuts, says economist Nevil Speer. "In other words, the retail beef case may be challenged nearly by pork and poultry in the ground beef department, not beyond roasts and or steaks. As such, nosotros may brainstorm to witness greater pricing diversion across the beef categories going forward in 2016."

The toll of domestic 90CL has strengthened this year, advancing every week to an boilerplate of $214.99 per cwt the week ended March 5. Merely this was still 26.five per centum beneath the price of the same week last twelvemonth. The cost of fatty trimmings (50CL), which as well get into the ground beefiness supply, increased sharply that week to average $66.72 per cwt. Merely this was 25.6 percent below last yr. The cost increment however was supply not demand related. Year-to-date cattle slaughter was downwardly ane.1 percent on last twelvemonth, through March 5 and imports, notably from Australia, were downward sharply.

Future is bright

Ground beefiness giant Cargill Beef however sees a bright future for ground beefiness and it's putting its money where its mouth is. Information technology announced at the commencement of March that information technology was acquiring the FPL Food, LLC ground beef processing plant in Columbia, Due south Carolina. Terms of the purchase were non disclosed and the transaction was expected to close around the terminate of March.

"Cargill footing beefiness customers served by this establish will do good from closer proximity to supplies and improved transit time for their orders," said John Keating, president of Wichita-based Cargill Beef. "This acquisition underscores our ongoing commitment to grow our protein business and will enable us to better serve retail and foodservice customers in a region where people dearest ground beefiness."

Cargill described its Northward American beef concern equally one of the largest producers of ground beef products in the world, with numerous processing plants in the U.s.a. and Canada. This author's data suggest Cargill can produce more than v one thousand thousand lbs. of ground beef products per day or more than 1.2 billion lbs. per twelvemonth. This puts it well alee of second largest ground beef producer Tyson Foods and third largest JBS USA Beef.

"Basis beef is a staple in the diet of most U.s. consumers and we've recently seen encouraging trends, including a resurgence for premium gourmet burgers," Keating says. "Rebuilding the US beefiness cattle herd from the severe multi-year drought suffered in Texas and the southern plains is well underway, which will result in an increased beef supply later this year and beyond. The increased supply should benefit our customers and consumers over the next few years."

Keating also notes that forecasts say global beef need continues to increase significantly and that Usa need is solid. Cargill though and all others in the footing beefiness business will be hoping that the onset of the grilling flavor this calendar month will heave the footing beef market place at the wholesale and retail levels.