Meat prices cause demand worry

Meat prices cause demand worry

Escalating retail meat prices and narrowing supplies have market participants second guessing supply and demand.

THE U.S. Bureau of Labor Statistics reported that consumer food prices last month rose at the fastest pace in more than a year.

In particular, the food index rose 0.5% in May after rising 0.4% in each of the three previous months and was slightly higher than increases seen in all other categories of consumer prices, with the exception of energy.

Moreover, the food consumed at home index increased 0.7%, the largest jump since July 2011. In comparison, the index for food consumed away from home grew only 0.2% in same time period.

Looking more closely at the indexes of the six major grocery store food groups, the index for meats, poultry fish and eggs rose 1.4% last month, while dairy and related products climbed 0.6%.

Conversely, the Oklahoma State University (OSU) "Food Demand Survey" (FooDS) for June showed that grocery food expenditures, at $94.84, were actually down 1.56% from May, while expenditures for food consumed away from home, at $46.89, declined 6.5% from the previous month.

Still, "Consumers continue to expect higher meat prices, and their expectations of higher prices are much more pronounced today than they were a year ago," OSU economist Jayson Lusk said.

What's more, the survey respondents also planned to pay more for beef than last month but anticipate the price of chicken and pork to remain about the same.

The good news for the meat and poultry industries is that, heading into the Fourth of July grilling season, consumers indicated a willingness to pay more for all food products versus a month ago.

Specifically, FooDS found that participants were willing to pay $1.17/lb. more for steaks, 63 cents/lb. more for pork chops and 72 cents/lb. more for chicken breast and chicken wings (Table).


Meat demand, willingness to pay

















June 2013







May 2014







June 2014







May-June, % change







Source: Oklahoma State University.


While reports of good demand heading into a holiday weekend are welcomed, it also could place stress on already constrained supplies for both beef and pork.

Packers will be bidding aggressively to fill holiday orders, as reflected in the improved cash prices for beef and pork last week.

For the hog supply situation, after the fireworks displays are over, certain pork items — such as loins, hams and ribs — could be at lower prices than their seasonal norm.

Hog slaughter totals were light last week as a result of Smithfield's Tar Heel, N.C., processing plant being closed due to an ammonia leak.

Also, because summer temperatures depress the daily gains of market hogs, pork supplies could go further into negative territory prior to the anticipated drop-off in slaughter rates due to porcine epidemic diarrhea virus (PEDV).

A seasonal pull-back of domestic and global pork demand usually occurs in the upcoming month. However, 2014 has not been the poster child for "normal" when it comes to the livestock markets.

Currently, consumers are paying 13% more for a pound of pork at retail than in May 2013, according to calculations from the U.S. Bureau of Labor Statistics and the U.S. Department of Agriculture.

The computed retail pork value was $3.95/lb. last month. USDA is estimating retail pork values to break $4 in the second half of 2014, which could motivate shoppers to choose a different animal protein (Figure).

Meat prices cause demand worry

As Steve Meyer wrote in the "Daily Livestock Report," consumers typically, starting in mid-July, purchase fewer loins, ribs and hams.

In addition, recent stronger export demand in Mexico, Asia, South America and even Russia has fueled an advancement in ham prices, although export orders normally also drop off in July and August. A seasonal drop could give the supply a reprieve.

Be that as it may, piglets that were born during the peak of PEDV losses last February and March should be coming to market beginning in July. Depending on the source, estimates are that the PEDV impact will reduce total 2014 pork production by 3-10%.

The PEDV panic train over hog supplies sent hog prices soaring in March. In late April, the market applied the brakes and began correcting itself, which softened hog prices.

Last week, the report that USDA approved a PEDV vaccine gave market traders hope that a cure for the virus had been found.

However, by the end of the week, talk regarding the effectiveness of the new fast-tracked vaccine was dialed back significantly, especially as a statement from the manufacturer suggested that the vaccine may not be overly effective in cold weather, according to Dennis Smith at Archer Financial.

For now, the wait-and-see game continues, with hog market participants searching for answers in the weekly slaughter totals or in the USDA "Quarterly Hogs & Pigs" report set to be released June 27.


Livestock slaughter

For the month of May, overall red meat production was 3.95 billion lb., down 5% from May 2013. For the first five months of the year, red meat production totaled 19.6 billion lb., 3% lower than last year.

Beef production was 7% below year ago at 2.07 billion lb., with cattle slaughter at 2.63 million head, down 8% from 2013. The average liveweight, however, was 1,299 lb., 10 lb. heavier than last year.

Likewise, pork production totaled 1.86 billion lb., down 2% from the previous year. Hog slaughter totaled 8.62 million head, 6% lower than 2013. The average liveweight was 287 lb., up 11% from a year ago.

Accumulated production totals for January to May 2014 showed that beef production fell 5% from 2013, while pork production decreased only 1%.


Market roundup

The supply and demand shuffle continues to keep the livestock markets unstable.

In the cattle markets, traders will be closely watching the monthly USDA "Cattle on Feed" report, which was scheduled to be released after this issue went to press.

In general, analysts are expecting the report to show that feedlots placed fewer cattle on feed during May.

The Livestock Marketing Information Center's pre-report estimates penciled June 1 cattle on feed at 98.0% of a year ago, May placements at 90.5% and April marketings at 95.5%.

Recent reports indicate that pasture and hay conditions are improving, which motivates cow/calf producers to retain heifers. As a result, the availability of feeders continues to shrink.

The tight supply of both fed and feeder cattle has fueled advancements in the cash and futures markets to recent peaks at a time when retailers are filling their meat cases for the Fourth of July holiday.

Volatility was the theme in cattle futures last week. Feeder cattle traded the limit down last Wednesday but finished limit up at $207.55 at the close of markets last Thursday. Live cattle futures rebounded after a midweek drop to settle at $148.00/cwt.

For the major feeding regions, the cash fed cattle trade picked up last Thursday, with bids ranging from $147 to $150/cwt.

Beef cutout values were strong last week, with the Choice cutout finishing at $240.40/cwt. and the Select cutout at $233.09/cwt.

The hog markets continued their wild ride as packers bid more aggressively. The average price last Thursday was $116.64/cwt. for the eastern Corn Belt, up $3.67 from the previous week, and $119.59/cwt. for the western Corn Belt, up $3.14 cents.

Lean hog futures, after recovering several times during trading hours, climbed last week to settle at $128.05/cwt.

Similarly, pork cutout values remained strong and finished at $128.10/cwt. last Thursday. Loins settled higher at $128.10, while hams and bellies also gained to settle at $121.42 and $169.89, respectively.

The chicken markets saw a steady climb in price last week with the Georgia dock for whole broilers at $1.1125/lb., up 5.5 cents from a year ago. Breast meat prices declined last week to settle at $2.23/lb., while leg quarters held at 55.5 cents/lb. and wings were at $1.345/lb. last Wednesday.

Egg prices for all regions decreased 12-15 cents last week, with prices for large eggs at $1.14-1.18/doz. delivered to the Northeast, $1.13-1.16/doz. to the Southeast and $1.12-1.14/doz. to the Midwest.

Volume:86 Issue:25

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.