CME: Pork Demand Very Strong in 201325 November 2013
US - USDA released its meat and poultry retail price data for September and October this week, write Steve Meyer and Len Steiner.
The September data had been delayed due to the October government shutdown and October’s data was delayed a few days due to some correction of bacon prices by the Bureau of Labor Statistics. This month’s data reflect that correction which increased the average retail pork prices for each month this year by an average of 5.6 cents/lb. or 1.6 per cent. The November release also reflects an adjustment in beef prices from 2008 through present that corrected a calculation error.
The revised data indicate that October saw new recordhigh retail prices for beef, pork and broilers. Choice beef sold for a record $5.355/lb. retail in October, 1.2 per cent higher than in September and 7 per cent higher than one year ago. All-Fresh beef, which includes Select and non-graded beef sold through retail outlets, sold for an average of $4.977/lb. retail in October. That figure is 0.6 per cent higher than in September and 4.6 per cent higher than one year ago. The average price of retail pork in October, with the correction made for bacon prices, $3.809/lb., up 0.4 per cent from September and a whopping 9.3 per cent from last year. USDA’s composite broiler price was $2.031/lb., 1.3 per cent higher than last month and 8.6 per cent higher than one year ago.
Finally, the average turkey price for September was record high and still stands as the record since BLS and USDA did not publish a turkey price for October. The September average retail turkey price of $1.819/lb. exceeded the old record of $1.812/lb. set back in March 2012 and is 12.2 per cent higher than one year ago. It also represents a 14 per cent increase from the shockingly low price of just $1.595 that turkey fetched in June.
When combined with per capita consumption figures, these retail prices indicate that meat and poultry demand remains generally strong so far in 2013. In fact, we would characterize pork and chicken demand as very strong so far in 2013, gaining 4.1 per cent versus one year ago for January through September (the latest month for which export and import data are currently available) and 3.1 per cent versus one year earlier for the past 12 months. Those same figures for chicken are +2.9 per cent YTD and +3.4 per cent for the past 12 months. Beef demand is higher as well but it’s percentage gains are somewhat smaller than the those for pork and chicken at +1.9 per cent YTD and +1.3 per cent for the past 12 months. Turkey demand is still lagging the prior year for both time frames (-1.2 per cent YTD and –3.8 per cent for 12 months) but those figures have improved sharply since June.
All of these comparisons of calculated demand indexes beg the question “Are they true?” We know the calculations are both sound and accurate but do they in fact represent a shift of the demand curves for all of these proteins? Per capita disposable income is barely larger than last year so the income effect on meat/ poultry demand is likely near zero. Exports are removed from the quantity calculation. So do these figures represent a rather dramatic change in preferences for muscle proteins? It certainly appears so on the surface. We would still be more comfortable if the BLS-USDA data were weighted by actual sales quantities since we know that larger tonnage is moved at the lower prices in these averages. But does that distortion change from year to year? Yes but probably (?) not by a great deal thus leaving these conclusions valid.
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