US – US consumers have enjoyed lower prices for beef, pork and chicken this year and, based on current trends in wholesale markets, the trend is likely to continue in the new year, reports Steiner Consulting Group, DLR Division, Inc.
But the downward price adjustment has not affected all proteins the same way. In the last couple of months retail prices actually have increased compared to a year ago, which could influence consumer purchasing behavior during Q1.
The November survey data from the Bureau of Labor Statistics (compiled by USDA) shows continued chicken price deflation but higher retail prices for beef and pork. The average price for fresh beef at retail in November was reported at $5.81/lb., 0.9 per cent higher than the previous month and 0.7 per cent higher than a year ago.
Retail beef prices rose sharply in June and July following escalating wholesale beef prices and robust consumer demand. Since then prices have declined but are still above 2016 levels. There is no distinct seasonality in retail beef pricing (there is for specific items) and largely prices at retail will tend to follow the long run trend in the beef cutout.
The choice beef cutout moved higher in September and October, leading to the higher prices for beef in November and very likely in December as well. The higher prices could be problematic for beef sales in the near term.
Supplies of market ready cattle by 1 January are expected to be as much as 5 per cent higher than a year ago. A mild winter (so far) has caused cattle to perform better and cattle weights have been moving counter seasonally higher in the last two weeks, further adding to the beef pounds coming to market.
Cattle futures have pulled back recently, indicating that market participants recognize that lower prices may be needed in order to maintain the product flow and prevent product from backing up, be this in the feedlot or freezer.
But the factors that have supported beef demand to this point remain in place; whether low unemployment, higher disposable incomes or strong global growth. The pullback should help set the stage for more beef features going into the spring and offer renewed support to cattle/beef into the spring.