Retail Meat Prices Are Reaching For A Record High

Retail Meat Prices Are Reaching For A Record High

Rising prices in grocery store meat cases today are result of livestock producers cutting back on production over the past few years when livestock prices were poor and profitability had dried up.

Livestock producers in the United States have trimmed meat supplies to balance the supply with demand to try to keep livestock prices at levels that are profitable to farmers.

Data gathered by the Bureau of Labor Statistics and reported by USDA show average retail prices of all four major meat/poultry species are now at or near record highs. "These price series tend to lag behind price changes at the farm and wholesale," says Altin Kalo, an analyst with Steiner Consulting Group, Manchester, N.H. That's logical because:

* Higher costs tend to get "passed along" to downstream levels.
* Some retailers and food service operations work on long-term price arrangements.
* Retailers/food service establishments tend to try to hold the line on pricing as long as possible to avoid conflicts with their customers.

New highs in retail meat prices are almost certain to be reached

Retail pork prices have set record-highs in each of the last two months, the latest being $3.104 per pound in June.

Retail prices for Choice beef and All-Fresh beef (which includes Choice, Select and store-grade product) rose to $4.491 and $4.09 per pound, respectively, in June - both within 3.5 cents of their all-time highs. Both are almost certainly headed for records as last year's small calf crop comes to market in 2011.

The average turkey price in June was $1.471 per pound, less than 1 cent below its record high. Only the composite broiler price has lagged. But it has risen by over 6 cents per pound in the past two months and is now less than 10 cents per pound from its record high.

Tight supply is the driver of higher meat prices this time around

"These recent meat price rises are fundamentally different than those of 2008," says Kalo. "In 2008 robust exports of meat removed product from the U.S. market. Plus higher transportation and packaging costs driven by record-high oil prices pushed meat prices higher."

What's behind the price rise this time? "Lower meat supplies resulting from the runup in feed costs for livestock producers over the past four years are driving this year's retail meat price hikes," he says. "It took a while, but livestock and poultry producers have gotten chicken, turkey and hog supplies rationalized enough to return the sectors to profitability for producers."

"Beef isn't there yet," he notes. "But this year's cow slaughter and smaller calf crops to come will do the job. Consumers pay all costs in the long run."

Summing up current situation, economists make key points:

* Retail beef prices are currently advancing to record highs. Other meats are already there.
* Retail meat prices this time around have not advanced as sharply as farm prices for several reasons.
* Current retail meat price gains are being driven by tight supply of meat rather than by robust exports.

TAGS: USDA
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