“Where’s the beef?” – Headed Higher Despite Alternatives Challenge
Beef prices tend to form a seasonal high in March as packers have purchased inventory ahead of the summer grilling season. Then as grill masters supplement steaks and burgers with pork ribs, chicken and other delicacies, beef consumption starts to decline in the hot weather. But beef supplies also begin to dwindle as feed lots are short on inventory.
Live Cattle prices typically hit a seasonal low in mid- to late June and then begin to rise before the school season begins as federal government subsidies for school lunch programs kick in for beef purchases. Consumption continues to increase through the winter and holiday season, generally keeping cattle futures prices higher through mid-February.
Our top longer-term seasonal play for live cattle is to go long the April 2020 contract near the usual June low on or about June 20 and hold it for 160 days until early February. Over the past 49 years this trade has been positive 33 times for a success rate of 67.3%. After failing to deliver gains in 2015, this trade returned to profitability in 2016 with a modest gain and was again successful in 2017 and 2018. More recently, live cattle appears to be on track to repeat it seasonal pattern again this year. Live cattle reached a high in early March this year and has been falling since with early signs of finding a bottom.
Alternatives to beef such as those offered by Beyond Meat (BYND) and Impossible Foods (and the ever-growing list of companies jumping are the trend) may put some pressure on traditional beef, but real beef is not going away. Curious shoppers are likely to give it a try when they look for their next burger or ground product. Some will make the switch, others will not. Cost will be one factor sodium content may be another. Then there is the simple fact, its just a burger, its not a steak, roast or any other numerous cuts available.