CME: Turkey Consumption in 2013 Steady; Broilers Recover Slightly

US - While supplies of poultry, hogs and, especially, cattle have been a major focus of our discussions of prices this past year, demand has been a tremendously positive influence as well, according to Steve Meyer and Len Steiner.
calendar icon 18 December 2013
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Year-on-year changes in per capita consumption of the various species have been mixed in 2013 with beef being lower (-1.8 per cent), turkey being steady and pork and broilers recovering slightly (+1.8 per cent and +1.6 per cent, respectively).

But as DLR readers know from repeated admonition, DEMAND IS NOT CONSUMPTION. Price is the other part of the demand equation and price performance for all meats has been nothing short of spectacular this year.

Consumers have demonstrated a rather surprising propensity to pay more for meat and poultry products at retail with Choice grade and all fresh beef prices rising by 5.9 per cent and 5.1 per cent, respectively, pork prices gaining 4.3 per cent and composite broiler prices growing by 4.2 per cent. Turkey prices are virtually even with their 2012 levels.

By deflating prices to reflect any change in the value of the dollar and then multiplying price times per capita consumption, we arrive at real per capita expenditures (RPCE) for each species. These figures are very similar to the demand indexes first developed by Professor Glenn Grimes at the University of Missouri to gauge changes in meat demand.

The only difference between the two is that the demand indexes use an assumed elasticity of demand and then state changes in index terms — ie. as a percentage of some base time period. RPCE makes no assumption about the elasticity of demand but includes it implicitly in the negative relationship between per capita consumption and real price. RPCE also simply states the result in dollars instead of as a percentage of a base period.

As can be seen from the following charts, 2013 has been a good year (+3.7 per cent through October) that has gotten better (+7 per cent, yr/ yr for the month). Pork has led the way, year-to-date, gaining 5 per cent on 2012. Chicken RPCE is up 4.1 per cent for the year through October and beef RPCE is up 3.2 per cent. Turkey RPCE is down 0.7 per cent YTD reflecting the pricing challenges encountered last summer.

In total, October’s RPCE of $45.98 is the highest since September 2007. Save for that month, it is the highest since the Atkins Diet began to lose favor back in 2005. With real disposable income flat for the year and relatively prices of beef, pork and chicken not much different from 2012, it appears that consumer preferences for meat are quite strong. Let’s hope that continues in the new year!

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