Source: John D. Anderson, Deputy Chief Economist, American Farm Bureau Federation
Last week, USDA Economic Research Service (ERS) released their estimates of monthly average retail meat prices for November. According to this data, beef prices continue to edge higher. Both average Choice and All Fresh retail beef prices rose by about 1% compared with October. The All Fresh retail beef price in November averaged just over $5.01 per pound – the first time this price has surpassed the $5 mark. The all fresh beef price is 4.5% higher than it was last November.
By comparison, both pork and broiler retail prices declined in November compared with the prior month. Pork prices were off by just under 1% from October; however, broiler prices fell rather sharply. The November average broiler composite retail price in November worked out to 195.57 cents per pound. This is a decline of almost 4% from October. That is a fairly sharp drop in a single month. In fact, it is the largest monthly decline in the retail broiler composite price since July 2009. Broiler prices remain above the year-ago level, but not by much – about 1%.
The decline in retail broiler prices is perhaps a little striking in its magnitude, but the fact that prices are declining is not really surprising. Wholesale broiler cut prices have been falling – and falling sharply – for some time now. For example, wholesale boneless/skinless (b/s) breast prices peaked in June at just over $2 per pound but have recently slipped to just over $1.25 per pound. The change in prices on other cuts has not been that dramatic, but all – wings, leg quarters, b/s thighs, etc. – have fallen to below year-ago levels over the past couple of months.
The behavior of wholesale chicken prices raises questions about demand for that product moving forward. For much of the year, retail demand appears to have been pretty strong: the industry has managed to sustain higher year-over-year prices along with increased production. The sharply lower wholesale prices over the last couple of months along with the rapid erosion of retail price in the November data suggest that this may not continue much longer. The prospect of increasing broiler production has naturally raised concerns in the beef sector about a further loss of market share as beef production will almost certainly continue to decline in 2014. If broiler demand is really waning, as it appears to be, beef’s prospects for holding onto market share may be improving.
Cattle on Feed Summary
USDA released the December Cattle on Feed (COF) report on Friday afternoon last week. The report appeared to be on the bullish side, as the report’s headline numbers all came in on the favorable side of expectations. November placements were down just over 3% compared to an average pre-report estimate that placements would be about even. Marketing were down 4.5% compared to last year, well to the high side of pre-report estimates. The total on-feed inventory was down 5.5% from a year ago, at the low end of pre-report estimates. Table 1 below summarizes the COF headline numbers.
Fed cattle prices just held on to the $130 mark last week. Through last Thursday, the 5-Area average price worked out to $130.03 in light trade, down just a few cents from last week and off from the fall high of $132.66 in the last week of November – but obviously not too shabby. Wholesale beef prices continued to slip this week. The Choice cutout started the week at just under $200 per hundredweight and finished the week at $196.79. The pork cutout fared still worse, declining from $91.14 on Monday to finish the week at $85.39 on Friday. Calf markets will be shut down completely for this week, and many key markets (e.g., Oklahoma City) will miss two weeks of sales for the Holidays. So in the last significant calf trading of the year last week, prices ended the year on a high note. In the National Feeder and Stocker Cattle Summary for last week, calf prices were called $5 to $10 higher on steers and $2 to $5 higher on heifers. Feeder prices were steady to $5 higher. The prices may have reflected a bit of pent-up demand as nasty weather over most of the country in the week prior had made doing business difficult and, in some cases, had kept auction barns completely closed.
Please allow me to take this opportunity to offer my sincere best wishes for a Merry Christmas and a happy and blessed New Year.