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CME: Grocery Store Beef Prices in May Up from April

14 June 2019

US - The US Department of Labor released their monthly report on retail prices on Wednesday, from which USDA Economic Research Service (ERS) parsed and translated the trend in grocery store meat prices, reports Steiner Consulting Group, DLR Division, Inc.

Beef and pork prices, in the aggregate, were climbing, consistent with wholesale price trends for these commodities earlier in the year. Retail chicken prices in May were close to unchanged from the prior month.

Pork prices posted the biggest April-to-May gains in percentage terms, jumping 2.5 percent. Comparing to a year earlier, pork prices were 3.8 percent higher. Since hog prices in the Midwest jumped over 50 percent from February to April, the increase in retail pork prices should not be too startling.

A bigger issue is how much will retail pork prices adjust in the next few months. Fears of meat shortages in China and Southeast Asia due to the outbreak of African Swine Fever lead to prospects of unprecedented levels of pork shipped from the US, as well as other major pork producing countries.

The last major livestock disease episode to hit the US pork market was Porcine Epidemic Diarrhea (PED) in 2014. That year, retail pork prices in January were one percent higher than they were this January, and the April-to-May price jump was 3.8 percent.

Retail pork prices peaked in September, only 2.8 percent higher than in May. Bacon prices were center-stage that summer, topping $6.00 per pound for the first time in May, with prices topping out at $6.10 in June. Those prices were effective in curtailing consumer demand for bacon for the rest of the year. Bacon prices this May were only $5.81 per pound.

Pork production this summer is forecast to be up four percent from last summer and even with a big increase in pork exports, pork supply available to the domestic market should still be up from last year. The bigger supply of pork should be a factor limiting additional increases in retail pork prices.

Grocery store chicken prices have stayed within a range of $1.85-$1.90 per pound for 16 of the last 17 months since the end of 2017. To some extent, the static nature of these prices is an extension of a similar trend in chicken feed costs driven by favorable crop harvests. Inventories of corn and soybeans have been maintained at adequate, and sometimes abundant levels since 2015.

Problems getting this spring’s corn crop planted due to wet Midwestern weather could be a threat to grain harvests this fall, pushing grain prices and chicken feed costs higher. This point is pertinent to the economics driving beef and pork production, also, and the retail prices for these commodities in 2020.

Grocery store beef prices in May were up 1-1.5 percent from April. Choice-grade beef prices were up 3.5 percent from a year earlier. Measures of beef sold in fresh form, including ground beef from beef breeding stock and imported beef was up 3.7 percent year-over-year. Ground beef prices were up 4.8 percent from May 2018 while steak prices were up 2.0 percent.

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