Choice beef led the way in March gains at 1.5% while the whole broiler price increased 1.1%. All-Fresh beef, pork and turkey all gained less than 1% in March while the composite retail broiler prices fell by 2.5%.

Relative to one year ago, beef prices and whole broilers showed large gains in March. The Choice beef price was record-high at $5.30/retail pound, 4.9% higher than last year. All-Fresh beef was also record high at $4.918/retail pound, up 5.3% from March 2012. Whole broilers, at 1.471/pound, were 7.2% higher than last year.

Pork, composite broiler and turkey prices were lower than last year. The average turkey price in March was $1.593/pound, down over 12% from last year. But remember that the March ‘12 turkey value was far and away the record high at $1.812/pound. Pork prices were 0.7% lower than one year ago while composite broilers were down only 0.2%.

There is growing concern that retail prices are not mirroring wholesale values in a manner that will keep product moving to consumers. The charts on page 2 (see full report) show USDA’s data for retail price, wholesale value and net farm value. There is no farm value for chicken since there is no significant farm-level trade in the sector due to vertical integration. All of these values are adjusted to a retail weight basis and are thus comparable from level to level.

It is easy to see where concerns are rising in the beef and pork sectors. Retail beef prices have risen by nearly 8% since September 2012 while the average wholesale and net farm values have increased by only 1%. We believe much of this discrepancy is, to a great degree, happenstance in which we and other analysts have played no small role. Virtually everyone has expected wholesale beef prices would climb to new records due to drought– and cost-impacted placement patterns of the past two years. That expectation has been ubiquitous to say the least and has led retailers to prepare for the cost shock by pushing retail values higher.

Consumers never like price increases but they like abrupt increases even less so easing into the higher price scenario was a good strategy. $200-plus wholesale choice beef, though, has proven an elusive creature and now it appears that retail prices are out of line with wholesale and farm values. Is that bad? Yes from a fairness — to both suppliers and consumers — standpoint but maybe not from a long-term business view as long as product is moving and not backing up either in cold storage or in feedlots. “Value space” can allow upstream prices to move quickly where having to lift the entire price structure can be an arduous task.

The same net situation is true in the pork complex even though the drivers are different. Retail pork prices have not risen but have in fact remained high even as wholesale values have struggled.

This is a situation where there is more product available on domestic markets due to export challenges and keeping it moving may indeed require lower prices at retail. Having some “value space” to support a wholesale pork or hog price rally is good but keeping product moving is paramount, we think, in this situation.

And that brings us to the curious case of chicken where retail prices have been stable in spite of a rapid increase in wholesale values. Are retailers swallowing margin to keep chicken attractive as a traffic driver? Some of the recent increase in wholesale chicken value is due to a change from 12-city to national composite values. But the 12-city price was rising rapidly before being eliminated by USDA in January.

USDA’s monthly Cattle on Feed report for April will be released this Friday afternoon and the eleven market analysts surveyed by Dow Jones Newswires expect lower placements, lower marketings and lower inventories. Those are all three familiar stories for the feedlot sector of late. The ranges and averages of the survey responses appear at right. Should these estimates prove accurate, they
would imply an increase of 39,000 head in the number of cattle in U.S. feedlots with capacities of 1000 head and more during March, pushing that number to 10.896 million. The 93.5% estimate for marketings would put them at 1.793 million head, a figure lower than the lowest March of the last 5 years. Placements at 99.1% would put that figure at 1.776 million head, an increase of nearly 300,000 head over the February placement level.