BBQ food prices skyrocketing

BBQ food prices skyrocketing

Market participants worry consumer demand for beef and pork will sizzle after holiday weekend.

BBQ food prices skyrocketing
THIS Fourth of July, Americans will pay more for their backyard barbecue meals than ever before, according to the inaugural 2014 "Rabobank BBQ Index."

The overall cost of a 10-person barbecue is $66.82 in 2014, up from $55.62 in 2007 and $51.90 in 2004 (Infographic). The higher price of commodities is the main reason for the sharp increase.

"While commodity price fluctuations are not always passed on to retail prices, American consumers will feel some significant market changes this Fourth of July," said Bill Cordingley, head of food and agribusiness research at Rabobank. "The beef market has exploded this year, and retail ground beef prices, the heart and soul of the American barbecue, are up an astonishing 71% over the last five years. We think there will be more pluck than chuck this year as some consumers lean to chicken sandwiches over burgers."

Utilizing data from the Bureau of Labor Statistics, Rabobank's BBQ Index tracks the price of typical barbecue ingredients, from main dishes of grilled chicken or a cheeseburger on a bun topped with lettuce, tomato and pickles to chips and ice cream on the side and soda and beer to wash it down.

While beef prices have seen the steep increase of 71% over five years, including 14% over the last year, chicken prices have remained fairly flat, rising just 3% over five years and 1% since last year.

In addition, retail cheese and ice cream prices have both jumped 15% in the past five years. Most of the gains in cheese occurred in the last year, with prices up 11%.

The BBQ Index shows that the consumer price index (CPI) is expected to increase 2.5-3.0% over 2013 levels for food, food consumed at home and food consumed away from home.

The U.S. Department of Agriculture's Economic Research Service (ERS) estimated that food price inflation will return to a range closer to the historical norm. Although the food-at-home CPI in the first five months of this year has climbed at a quicker pace than in 2013, its current trajectory is on track for normal annual inflation.

For May, beef prices were virtually flat, up only 0.1% from April. The beef CPI has increased nearly 10% so far this year and is 10.7% higher than May 2013. Pork prices are up 12.2% from last year, and the CPI for pork increased 3.2% last month. Prices for all other meats rose only 0.3% last month and were up 3.3% from 2013.

Climbing milk prices over the past six months drove the dairy CPI up 4.2% from last year, but it increased just 0.6% in May. ERS forecasts dairy prices to increase 3-4% in 2014.

From April to May, egg prices dropped 2.3%, but they have increased 10.1% since the same time last year.

Furthermore, retailers have been busy stocking up for the long July 4 holiday weekend in hopes that consumers will fire up the grill. Market observers will be keeping an eye on consumer demand during the holiday and, more importantly, after the weekend celebrations.

 

Hogs and pigs

Last week, market participants were on pins and needles waiting for the USDA "Quarterly Hogs & Pigs" report, which was released June 27 after this issue went to press.

In addition, traders will begin closely monitoring weekly hog slaughter totals for the highly expected drop-off in market-ready hogs in order to get a better handle on the actual supply level.

At the close of business last Thursday, USDA reported the weekly hog slaughter total at 1.570 million head, up 70,000 head from the week before but down 43,000 from a year ago. The weekly increase in slaughter was the result of Smithfield's Tar Heel, N.C., plant reopening.

As illustrated in Table 1, the average of polled analysts' estimates pegged the U.S. swine breeding herd to be slightly larger than a year ago as a result of current great profit margins. However, most are anticipating a lower U.S. market hog inventory, which is not a surprise given the widely discussed impact of porcine epidemic diarrhea virus (PEDV) on the hog inventory.

Moreover, the analysts gauged the March-to-May litter size to be down 2.0-4.8% and the March-to-May pig crop to be 1-2% lower than last year. In general, analysts expect pigs under 50 lb. to be hit the greatest by PEDV.

 

Cattle on feed

The June 20 USDA "Cattle on Feed" report delivered no surprise punches and came in very close to traders' expectations.

As of June 1, the total cattle on feed inventory was penciled at 10.594 million head, down 1.6% from last year (Table 2). May placements came in right on target with pre-report estimates at 1.912 million head, a reduction of 7% from the previous year. In addition, May marketings were down 4.3% to 1.865 million head.

The bottom line is that feedlots will continue to beat the bushes and bid aggressively to fill feedyards.

 

Chickens and eggs

Another significant report released last week was USDA's "Chickens & Eggs" report, which revealed that the chicken industry is hesitating to expand despite fundamentals pointing to a promising opportunity as beef and pork prices surge.

The year-over-year growth for broiler-type breeding hens has been essentially nil since March and advanced only 2.2-3.4% in the first three months of the year. Moreover, those hens have produced fewer eggs for hatching in the past couple of months.

In the "Daily Livestock Report," economists Steve Meyer and Len Steiner warned not to be fooled into believing that the chicken industry has run across bad luck. Chicken businesses have historically performed well. In order to make the biggest profit, the companies, perhaps, are spending more time preparing before making their move.

 

1. USDA "Quarterly Hogs & Pigs" pre-report estimates

 

-2014 as % of 2013-

 

LMIC*

Urner Barry**

All hogs and pigs, June 1

98.5

97.0

Kept for breeding

101.8

101.6

Kept for marketing

98.2

96.6

March-May pig crop

99.9

97.7

March-May pigs per litter

98.0

95.2

March-May farrowings

101.9

102.5

June-Aug. farrowings

102.2

102.1

Sept.-Nov. farrowing intentions

102.7

102.6

Hogs weighing under 50 lb.

100.4

98.1

Hogs weighing 50-119 lb.

97.2

96.3

Hogs weighing 120-179 lb.

96.7

95.3

Hogs weighing 180 lb.-plus

97.5

96.4

*Livestock Marketing Information Center.

**Urner Barry survey of analysts' results (average).

 

2. Feedlot inventory, million head

 

 

 

 

2014 as %

Category

2012

2013

2014

of 2013

May 1 inventory

11.861

11.172

10.648

99.0

May marketings

1.816

1.892

1.865

95.7

May placements

1.847

1.869

1.912

93.0

June 1 inventory

11.571

11.070

10.594

98.4

 

Volume:86 Issue:26

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