We think that is a very interesting question that does not get asked often enough. And thus, it doesn’t get answered often enough either! Our analysis today is strictly graphical and anecdotal. Someone with more time (and talent, probably) available could do a much more sophisticated analysis of these data but we think the trends are quite suggestive of factors that are impacting cattle and hog markets.

First, let’s consider beef cuts. The top chart at right shows monthly average prices for a variety of Choice wholesale beef cuts as well as fresh 90CL (90% chemical lean) and 50CL trimmings. The muscle cuts represent commonly traded value-added wholesale cuts from each of the major beef primals.

We think it is striking that the prices of the two highestquality cuts in this grouping, bonless ribeyes and boneless strip loins, have fallen on a pretty consistent basis since 2005 and 2004, respectively. While we understand that lower disposable incomes, worries about the future, soft business for high-end restaurants, etc. have been at play since 2008, the downtrends for these cuts begin well before the onset of the Great Recession. In addition, the uptrends in the prices of lower-quality cuts such as rounds and chuck clods appear to have begun before the recession as well. They did indeed increase in pace since 2008 but, again, the recent upturn was just an extension of something that apparently started well before the credit and banking problems that brought about the economy’s downturn.

An alternative explanation could be consumers’ being more concerned about fat content as loins and ribeyes generally have more intramuscular fat (marbling) and marbling plays a much larger role in their desirability. Rounds and chucks, on the other hand, are generally leaner. But the fly in that ointment is briskets which usually contain far more fat than the “end-meat” cuts from the round and chuck. The same could be said for trimmings — which are not high on the list of low-fat items.

And then there is the surge in ribeye price this past fall. Is this a behavioral anomaly? An export driven spike? Or a change in the trend? Anyone who would like to believe the latter has to reconcile the spike in ribeys with the continued downtrend in strip loins, however.

We think the most serious question posed by these beef cut relationships is whether we are properly designing the animals from which the cuts come. If consumers are discounting “high value” cuts and paying relatively more for generally leaner, lower-priced cuts, do we actually need this many Choice grade cattle? Maybe the better solution is a super-efficient steer that will stay leaner. A point to ponder, we believe. The trends in pork cuts are more subtle. The “high-lean” cut in the pork complex is the loin. It is basically one big, lean muscle which is usually closely trimmed. It should be the darling of pork cuts for the modern diet. And loins have held their own among the prices of the various pieces of the pork carcass with no major downtrends and an uptrend in 2010-2011 that generally matches other cuts.

But like the beef complex, there are some very odd signals of consumer preferences in these prices. Study the lines representing bellies, butts and picnics. All three have gained over time on loins with belly prices almost always exceeding loin prices since 2009. All three of these cuts contain FAR more fat the does the loin. So, while we hear that people want lean, they are apparently bidding for cuts that do not fit that profile.

The truth is that fat, to a great extent, means flavor in meat of all varieties and consumers are apparently favoring flavor. They will tell us lean is important because that is what they are supposed to say — but they are paying for flavor! While producers need to raise lean hogs because they are far more efficient, they must constantly pay attention to muscle quality.