- news, features, articles and disease information for the beef industry


CME: Beef Retail Prices Fell Sharply on the Year

24 February 2016

US - Steve Meyer and Len Steiner review the January beef retail prices in more detail, especially how they relate to both wholesale prices and the price of other meat proteins.

The all fresh retail beef price in January was reported by USDA-ERS on Friday at $5.76 per pound, 23 cents (-3.8 per cent) lower than a year ago.

This was the biggest year on year decline in retail beef prices since October 2009.

Even as beef prices have started to decline compared to where they were last year, we have yet to make any significant dent in the retail beef price inflation of the last few years.

January beef prices were still 14 per cent higher than in January 2015 and 17 per cent higher than in January 2013.

Pork and chicken prices also were lower compared to a year ago. The average price of pork at retail in January was reported at $3.79, down almost 20 cents (- 4.9 per cent) compared to a year ago. The average pork price was up 1 per cent compared to January 2014 and 10 per cent higher than in January 2013.

Chicken prices have been declining steadily and chicken is now much more competitive relative to pork and beef. The average broiler composite retail price (this is the price of various chicken items sold at retail) was $1.93 per pound, 5.2 cents (-2.6 per cent) lower than a year ago and also lower than what it was in January 2014 or January 2013.

Another way to look at the competitiveness of beef relative to pork and chicken at retail is to calculate the ratio of the average beef price to the price of pork and chicken.

Interestingly, even as beef prices have increased sharply at retail in the last decade or so, the price of beef relative to pork has not increased as much as you may think.

While pork chops at retail remain cheap, the price of bacon or ribs has increased over time, keeping pace with the higher beef prices.

January retail beef prices were 1.5 times higher than the price of pork (5.76/3.79). This is a bit lower than what it was in 2006 when the multiple averaged 1.6 but not significantly higher than the average premium over the 10 year period 2005-2014 when the multiple was 1.3.

Beef has become notably more expensive relative to chicken however. In 2005, retail beef prices were about 2.1 times higher than the price of chicken at retail. Since early 2015, beef prices have averaged a little over 3 times the price of chicken at retail.

One question that is often asked is: why prices at retail, especially the price of beef, has not declined more given the sharp price declines at wholesale?

While it is well known that prices at retail tend to be sticky (i.e. they do not respond quickly to changes in wholesale prices) there are other factors at play.

One issue that has been flagged consistently when discussing the retail price series is that it is not sensitive enough to retail promotions and how they change the sales mix.

Another important consideration is how retailers measure performance and how that affects pricing of various items in the meat case.

In January, the retail price for uncooked ground beef was $4.396 per pound, 6 per cent lower than a year ago. Since September, ground beef prices have averaged 1.4 per cent under the previous year.

However, the price of 81CL coarse ground beef since September has averaged almost 29 per cent lower than the previous year. The opportunity was there to run big ground beef sales and still make a margin.

But what kind of a response can a retailer expect from a big ground beef sale in Q4, when the meat case already is full of hams, turkeys and holiday roasts?

Retail merchandisers are often measured on dollar sales. Lower the price too much and without a corresponding increase in volume sold and dollar sales take a hit, not a pleasant topic during the quarterly performance review.

Spring should bring an improvement in demand for ground beef and offer retailers an opportunity to promote it more aggressively. With half of beef consumed in ground form, it is a critically important issue if you are a cattle producer and beef packer.

Daily Livestock Report - Copyright © 2008 CME. All rights reserved.

TheCattleSite News Desk

Our Sponsors


Seasonal Picks

Animal Welfare in EPS - 5m Books