CME: June Meat Retail Prices Mixed

US - Retail prices in June were mixed, with beef values hitting all time record highs while pork prices on the retreat given the surge in pork volume and lower wholesale prices, write Steve Meyer and Len Steiner.
calendar icon 21 July 2015
clock icon 5 minute read

We have mentioned this often in the past but it bears repeating. The retail prices series has some significant limitations, most importantly that it is not a weighted average price.

If a retailer lowers the price of a product and thus is able to move more pounds, this is not reflected in the overall average price. But the series at least is consistent and it does help us understand some of the longer term trends and helps put in perspective the evolution of retail prices.

It also helps us understand the relative value of beef vs. pork vs chicken prices. Below are some of the highlights from the June retail price data:

Beef: The average price for all beef sold at retail was calculated at $6.1140/lb. in June, the highest price ever recorded.

The average June price for all beef items tracked was 11 per cent higher than the previous year. The average price of choice beef was $6.406/lb., slightly lower than the previous month but still some 8.3 per cent higher than a year ago.

Just about all beef items tracked by BLS registered double digit increases in June. The average price of all uncooked beef steaks was calculated at $7.9170/lb, 13.5 per cent higher than a year ago and about 40 per cent higher than what it was in 2011.

In June 2011, the average steak price at retail was selling at a 164 per cent premium to the price of pork chops. By 2015, the premium had increased to 207 per cent.

Retailers have been steadily increasing retail beef prices given lower beef supplies and record cattle values.

The average ground chuck price was $4.3240/lb, 10.7 per cent higher than year ago while the average price of all ground beef was $, 10.4 per cent higher than last year.

Pork: Retail pork prices have been steadily declining after hitting an all time high last summer. The average June retail pork price was calculated at $3.7030/lb., marginally higher than the previous month but 10 per cent lower than a year ago.

The spread between pork and beef prices at this point is $2.41 lb, compared to $1.39 a year ago and $1.31 in June 2011.

This is the largest pork/beef spread we could find and it reflects the divergence in terms of supply availability between the two species. Pork production will far surpass beef output in the US in 2015.

The latest USDA forecast projected total beef production in 2015 to be 23.889 billion pounds while pork production was expected to be 24.599 billion pounds.

Per capita beef consumption remains larger, however, in part because the US is a much larger importer of beef than pork.

Beef imports in 2015 are expected to be 3.4 billion pounds while pork imports are expected to be 1.083 billion.

In addition, the US exports about double the amount of pork than beef. Pork exports this year are projected to be 5.065 billion while beef exports are forecast at 2.436 billion.

The average price for pork chops at retail in June was $3.8240, 5 per cent lower than the previous year. On the other hand, the wholesale price of 1/4” trimmed loins in June was down 26 per cent compared to the previous year.

Retailers have been steadily reducing pork values but the rate of decline is trailing the change in price at the wholesale level. Pork margins are in excellent shape for retailers and we suspect some of those great margins are going towards subsidizing tighter beef margins.

Another clear example of this is the average ham price, which in June was quoted at $3.02/lb., about the same as a year ago and 19 per cent higher than in June 2011.

On the other hand, wholesale ham values in June was down 49 per cent compared to a year ago and also 20 per cent lower than in June 2011. Retailers are well aware as to when a cut in price will help generate volume sales.

June is not a prime time for ham buying and thus retailers are content to keep prices steady and enjoy the larger margin.

Retailers have reduced the price of bacon, which is a good seller this time of year. The average bacon price in June was $5.0590/ lb, 17 per cent lower than a year ago but 5 per cent higher than in June 2011.

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