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CME: Poultry Prices Remain Subdued

by 5m Editor
21 May 2010, at 7:31am

US - The April consumer price survey that was released on Wednesday morning (19 May) showed that retail beef and pork prices have begun to heat up while poultry prices remain subdued for the moment, write Steve Meyer and Len Steiner.

The most significant increase was in beef and veal prices, which were up 2.8 per cent from the previous month. This was the largest month to month increase since November 2003. Beef and veal prices are currently up 1.3 per cent from the previous year, ending a significant deflationary period for beef prices. Consumers also paid more for pork in April, with the overall pork price index up 1.1 per cent from the previous month but still just 0.2 per cent higher than in April 2009.

As with beef, pork prices had been steadily declining since last summer when a combination of excess supplies, disruptions in trade and overall uncertainty about H1N1 influenza caused prices to decline as much as 8 per cent. Prices for chicken parts, on the other hand, have yet to show much of an increase. April prices (this is the index for fresh or frozen chicken parts) was just 0.8 per cent higher than the previous year but prices are still 2.5 per cent lower than the previous year. The total poultry consumer price index showed only a 0.4 per cent increase from the previous month and it is currently 1.8 per cent lower than a year ago.

While broiler and turkey prices are on the rise, wholesale poultry prices increases have not been as significant as in beef and pork. This could be in part due to the larger than expected increase in broiler supplies, offsetting the improvement in domestic demand. It is also a likely consequence of the prolonged closure of some key export markets. Going into the summer grilling season, consumers are currently facing notably higher prices for beef and pork while chicken continues to present good value to retailers. It is a situation that we have seen before, with retailers featuring more steaks going into the start of the grilling season but then featuring a steady diet of chicken breasts as the summer wears on. It will be interesting to see how well cattle and beef prices hold up once consumers are faced with the current increases in beef prices.

An article yesterday in the Wall Street Journal noted how large fast food chains are responding to the surge in ground beef prices by looking for higher margin alternatives, such as chicken and salads. Will we see this in the grocery store isles as well? Or maybe consumers already are eating less beef and pork and with an improving economy, they may opt to go for that steak or juicy burger after all.