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Ribeye prices hit record, as quest for fat spreads to meat from dairy

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What's your poison?

It isn't just in dairy that fat has come back into vogue, but in meat too – even as consumers in the West, at least, are losing their sweeth tooth.

As Abares, the official Australian commodities bureau, said earlier this week, sugar use "declines are expected in the European Union and the US, where consumers are switching to alternatives such as high-intensity sweeteners".

By contrast, in the US meat sector, fat is back in, according to Steiner Consulting, after "decades of squeezing out flavour and joy from food.

"Whether it is highly marbled choice ribeyes, succulent bacon, inventively flavoured chicken wings, or full fat milkshakes, consumers are voting with their dollars for more flavour," the US-based analysis group said.

Pricey steaks

The case is based on the buoyant pricing of fattier cuts, such as boneless ribeye steaks, which "in the last two weeks has shot up above $10 a hundredweight, an all-time record level", Steiner Consulting said.

The ratio of boneless ribeye steak prices to values of fed steers, at about 8 times, "is dramatically higher than the sub 5x multiple we saw in 2013 and 2014".

The price ratio for lean beef items, by contrast, has been "steady to lower".

Appetite for bacon

And the trend is reflected in the pork complex too, where values of pork bellies, the source of streaky bacon, and pork trimmings had seen a "dramatic shift" relative to the price of hogs.

"Foodservice operators have become consistent large users of bellies, with bacon a preferred flavour enhancer on burgers, sandwiches and even salads."

And when retailers "decide they want to jump on the bandwagon and run $3.99 or $4.99-a-pound specials, the quantity demanded becomes explosive".

"Consumers are telling us that they demand flavour," Steiner Consulting said.

"Gone are the days when a consumer would accept a flavourless slice of 'protein' simply because it promised to be 'good for you'."

Dairy fats in demand

The comments came as results from Tuesday's GlobalDairyTrade auction underlined the demand for fat in the dairy market too, with anhydrous milk fat values gaining 4.4% to $6,885 a tonne, a record at the auction, and taking gains over the past year to 90%.

Butter prices rose by 2.9% to $5,768 a tonne, also a GlobalDairyTrade record, and taking gains over the past year to 98%.

By contrast, the overall GlobalDairyTrade index, which is weighted towards milk powder, fell by 0.8% on Tuesday, and is up by 56% year on year.

End of the rally?

The rise in butter prices has been reflected on futures markets too, with European butter futures for July on the German-based EEX exchange hitting E6,000 a tonne on Tuesday.

In Chicago, butter futures for July last week hit 272.50 cents per pound, the highest for a nearest-but-one contract since September 2014, although the lot has eased since to 263.725 cents per pound.

In fact, "it is easy to draw comparisons to the heady days of late 2015, when the butter market logged a meteoric rise and a spectacular crash," said the US-based Milk Producers Council.

"But this time is different," in part because the northern hemisphere "spring flush" production peak is now passed, while "the holiday demand season lies ahead".

'Robust demand'

"The US market is chasing European prices higher, with Oceania on its heels," the council said.

"If Europe's butter market can keep rising, ours likely can too."

And there is cause for price support, given that "Europe came into the year with butter inventories at a five-year low, and the bloc continues to report lower year-over-year production and robust demand".

By Mike Verdin

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