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CME: Retail Beef Prices Up This Month

13 July 2018

US - The Office of the Chief Economist released the latest WASDE yesterday, following usual protocol, updating crop acres to match the USDA NASS "Acreage" report but leaving yields on their respective trend lines, according to Steiner Consulting Group, DLR Division, Inc.

Notably, an announcement went out ahead of the report indicating that WAOB would consider current policy and address the tariff implications in the July WASDE. However, based on the changes or lack thereof to pork exports, it appears that WAOB largely adjusted numbers to reflect the May export figures with no changes to longer term forecasts.

It is unclear whether this implies that no impact is anticipated for pork exports or that is too early to know the trade impact. Soybeans and Soybean meal saw small adjustments to exports. Soybean exports were lowered 250 million bushels adjusting for China’s tariff rate increase and Soybean meal exports were increased 1 million tons citing smaller exports of meal from South America.

Bureau of Labor Statistics and USDA ERS released retail meat prices today updating the industry on the last stop in the supply chain, consumers. The retail margin (cutout to retail spread) is the largest component in the supply chain. In June that margin was more than 40 per cent of the retail value for beef, greater than 60 per cent of the retail value in hogs, and over 50 per cent the composite broiler retail price for poultry.

Retail prices tend to adjust very slowly to changing wholesale prices. For example, retail beef prices increased this month 1.4 cents per pound, compared to the boxed beef cutout falling $8.30. This opposing move further stretched the cutout to retail spread in the beef sector by $60 per 1000 lb. of steer. Compared to a year ago, the boxed beef cutout is 9 per cent lower, retail prices are 4 per cent lower, and the cutout to retail price spread is 4 per cent higher.

On the pork side, retail prices fell compared to May, declining 4.4 cents per pound. Retailers saw $24.50 less per hog on their margins, in part because pork cutout values increased $18.61 per hog. Still, hog retail margins are above a year ago even with a large decline from May to June. Retailers share is 6 per cent higher compared to June 2017. The cutout is down 14 per cent, while retail prices have moved lower by 2 per cent.

Poultry wholesale prices have also slid since last year, down 11 per cent. The retail price has crept up slightly, nearly 1 per cent above June 2017, and retailer spreads gained 14 per cent. Month-over-month comparisons show that across the poultry prices are sliding. Both retail and wholesale prices fell in June compared to a month earlier. Wholesale prices lost $0.70 per pound and the retail price lost $0.80 per pound.

Importantly, retail prices are not actual prices paid by consumers and the retail to cutout spread does not reflect featuring of meat products that include deals or sales on meat, only the listed price. Because of the large volumes moving through the grocery lines at featured prices, club card specials, etc., we suspect that the actual grocery margins for certain meat products to be smaller than these numbers reference.


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


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