The indexes depicted in the following chart show modest increase for pork and beef and a healthy 3 per cent increase for chicken over the 12 month period ending in May. Only turkey demand appears to be soft at this time. When considered in total, real per capita expenditures (RPCE) for all four species are up 2.4 per cent year-to-date and are 1.7 per cent higher for the 12 months ending in May. RPCE for all species in the month of May was 1.7 per cent higher than last year and 4.4 per cent higher than the 2007-2011 average. When combined with last week’s Restaurant Performance Index growth, all of these numbers suggest that US domestic meat and poultry demand is healthy. Perhaps not robustly so but certainly solid.

Source: Paragon Economics,Inc. using USDA data. Elasticity of demand assumed to be ]0.75

The macroeconomic situation underlying consumer demand is, we think, much the same: Solid but not robust. Friday’s employment report showed an increase of 195,000 jobs in June, the same as was reported for May. The June gains imply that the first half of 2013 has been the best first half of a year since the recession, with this year’s total increase of 1.211 million besting last year’s 1.111 million. The unemployment rate remained steady at 7.6 per cent due to growth in the number of people seeking work which, we suppose, is a positive sign in and of itself. Note that these are all seasonally-adjusted figures.

Our concern — and perhaps the reason that meat and poultry demand growth is not more robust given growing employment numbers and a strong stock market — is the lack of growth in the amount of money that people have to spend. The bottom chart shows yearon- year percentage change for real personal disposable income, a figure we see as the “take-home pay” variable of macroeconomics. It is clear that, except for a spike in November and December of last year which was driven by bonuses being paid before the 1 January reversion to normal Social Security tax rates, the amount of money that people have after they have paid their taxes has not grown appreciably since 2010. Further, the 2010 and early-2011 gains of 2 per cent or so were due to being compared to the abysmal recession-driven levels of 2009. The fact is that consumers have spent 5 years at the same real income levels with May’s average of $32,875 per person being roughly equal to the levels of the fall of 2008. During that time period, the real retail price of beef has gone from $4.44/lb. to last month’s $5.24. Real retail pork price has increased from $3.01 to June’s $3.49. Interestingly, the real price of chicken at retail was virtually the same in June as it was in Q4-2008.

USDA will release its monthly crop production and supply/ demand estimates on Thursday. Analysts expect, on average, that USDA will reduce its estimate of ending stocks for both corn and soybeans with the new numbers expected to be 722 mil. bu. of corn and 121 mil. bu. of beans, down from 769 and 125, respectively. Both products are reportedly in very short supply in some areas — just as we expected they would be. The lateness of this year’s crop means that these already-tight stocks must last even longer to get to harvest!