March 20, 2013 / 8:18 PM / 5 years ago

Cold start to spring slows demand for high-quality U.S. beef

CHICAGO, March 20 (Reuters) - Persistently cold weather and snowfall on the first day of spring have crimped demand for high-quality cuts of beef in the United States at a time of year that typically sees increased purchases for so-called grilling season, analysts and traders said on Wednesday.

In a rare move, wholesale prices for choice-grade beef dipped below those of leaner but lesser-quality select cuts, according to the U.S. Agriculture Department.

The wholesale choice beef cutout declined to $192.94 per cwt, the lowest level since the first day of the month, while select beef was priced at $193.21.

“We need some nice grilling weather, some spring weather that facilitates the scraping off of backyard barbecues. Grilling season is an important turning point (in beef demand) and it’s certainly delayed this year,” said Jim Robb, economist at the Livestock Marketing Information Center.

Late-winter snowfall on the East Coast and below-freezing temperatures on the Spring Equinox in the Midwest contributed to a slow start to the grilling season while an early Easter holiday also limited buying during Lent, when many Christians eat less meat.

Beef prices remain near record highs after ranchers culled the U.S. cattle herd to the smallest in 60 years when last summer’s devastating drought sent animal feed prices soaring.

And the high cost of beef - retail prices hit a record of $5.24 per lb in January - may lead to more consumers grilling chicken or pork this summer while grocery stores give more advertising space to cuts with a better chance of selling.

Rising gasoline prices and the expiration of a payroll tax break are also keeping a lid on U.S. discretionary spending.

Top U.S. meat company Tyson Foods Inc late last month said margins were “compressed” this year in its beef business.

“With cheaper pork and broiler meat around, the retailers are likely to go away from beef. Beef is priced out,” said John Ginzel, an analyst at brokerage The Linn Group in Chicago.

Choice beef was priced 27 cents per cwt below select and discounted for the first time since April and only the 14th time in history, USDA data shows.

The inversion of the choice-select spread is rare and self-correcting because retailers snatch up the higher quality and yet less expensive choice product.

Choice beef has more “marble,” or fat, that many cooks sear on hot grills to lock in juicy flavor while select is leaner and less tender.

Winter storms early this month in the southern U.S. Plains cattle country also slowed the marketing of slaughter-ready animals, resulting in further weight gain at feedlots. That may have also resulted in more beef being graded as choice, the analysts said.

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