According to USDA’s monthly retail price data released on Friday, beef prices remain at or near record high and pork, chicken and turkey prices all increased in February. And this in the face of total meat/poultry supplies that were actually higher than one year ago.

While demand has seemed very soft, those data suggest otherwise at least at the retail level. Export challenges would not be reflected in these data but would be more acutely felt at the wholesale level. Any definitive conclusions about retail-level demand in February cannot be drawn until February export data are available in mid-April since trade volumes impact domestic per capita product availability. Some highlights of Friday’s data are:

• Choice beef sold for an average of $5.222/lb. in February. That is down 2.2 cents/lb. from January’s record high but is still 3.5 per cent higher than one year ago.
• All-fresh beef, which includes Select and store grade products, sold for a record $4.915/lb. in February. That figure is up 6.1 per cent from last year and fractionally higher than last month’s previous record high.
• Pork prices rose to $3.441/lb, 1.1 per cent higher than in January but 1.5 per cent lower than one year ago. The February average pork price is just 12 cents/lb. off the record set back in September 2011.
• The composite broiler price gained 0.8 cents/lb. in February to reach $1.948/lb. That is still short of December’s record $1.971/lb but is 6.6 per cent higher than last year. The average price of whole broilers (not shown in the chart) fell in February to $1.456/lb. but that figure is 7.4 per cent higher than one year ago.
• Turkey prices increased by 0.8 per cent from January to reach $1.591/lb. That figure is still 4.8 per cent lower than one year ago and well off the record of $1.812 set in March 2012.

One of — if not THE — key driver of the entire meat complex this year was to be beef. Last summer’s and fall’s sharply lower placements of cattle into feedlots was (and is still, we think) expected to lead to sharply lower cattle slaughter and higher beef prices this year. So the thinking was — and is. If it appears we are hedging on all of this, there is a good reason!

It hasn’t worked out that way yet but the past two weeks suggest it still may. Year-to-date total cattle slaughter was down only 0.6 per cent through 2 February. After last week it is now down 2.4 per cent. YTD steer and heifer slaughter was actually up 0.5 per cent from one year ago as of 2 February but was down nearly 2 per cent as of 3 March, the latest week for which steer/heifer data are available. Given total cattle slaughter that was down 5.9 per cent and 1.9 per cent, yr/yr, the past two weeks, those figures for steers and heifers are likely to grow more negative.

The chief evidence of that expected decline is, we think, the sharp rebound of beef cutout values over the past two weeks. Choice beef rallied nearly $10/cwt the week ended March 9 and added another $1.75 last week to reach an average of $196.75. That price is the highest weekly average for the Choice cutout since last October and is just short of the record levels reached in February of 2012 and again last summer. Some analysts believe $2.00/lb. is a huge psychological barrier to this market and the historical data support that point of view. How many people will pay retail beef prices commensurate with $2.00 Choice beef? We think the answer to that is “Not as many as will buy cheaper beef but FAR more than zero!” And we are just now reaching the marketing window for cattle placed in September, the shortest of those short placement months last fall.

The Select cutout has kept up quite well with Choice, reaching $195.27 last week, $11.44 higher than two weeks agp. The Choice- Select spread was just $1.47 last week, its lowest level yet in 2013. March and April usually see the lowest spreads of the year. Last year’s low was $0.30/cwt. the last week of March.