CME: US Consumer-level Meat, Poultry Demand Strong in July

US - US consumer-level meat and poultry demand remained strong in July. Total real per capita expenditures on beef, pork, chicken and turkey amounted to $44.62 in July, up from June’s $45.96 and 1.2 per cent higher than last July’s $44.08, write Steve Meyer and Len Steiner.
calendar icon 9 September 2014
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This year’s expenditures were also 5.3 per cent higher than the average over the period 2009 through 2013. July marked the sixth straight month of year-on-year increase for RPCE for the four major species but it was the smallest increase of any of those month. Monthly RPCE has fell short of one year earlier during only January this year — a result that has been generally attributed to harsh winter weather in the eastern United States.

As can be seen in the following chart, July’s result was the continuation of an uptrend that began in early 2010 when RPCE for the four species hit an all-time low. The charts below clearly show the normal seasonal variation of four-species RPCE with the low occurring in late winter or early spring and the high coming in the fall. That suggests that RPCE will continue to rise into the fourth quarter and will very likely pass last year’s peak of $47.03—-thus clearly continuing the uptrend.

It is important to note that per capita consumption of pork and beef have fallen steadily over that time period. But those declines have been driven by production cuts due to higher costs and, for beef, poor pasture conditions. But consumption is not demand. Price is the other part of that equation and retail beef and pork prices have risen — steadily through 2012 and then explosively since then.

Per capita chicken consumption has grown while turkey consump tion has varied but remains at almost the same level as in 2010. The prices of the two poultry species have not grown by nearly as much as have those for beef and pork. In fact, real (deflated) prices of chicken and turkey have declined. Still, both species’ RPCE grew last year. Both RPCE’s and traditional demand indexes rose for all four species in 2013 — the first time that has ever happened.

Of the four species, pork RPCE has seen the most dramatic growth since early 2012. It exceed year-earlier level in every month since December 2012. July’s pork RPCE was 5.6 per cent higher than one year ago, leaving year-to-date RPCE up 6.8 per cent. Pork’s RPCE ended 2013 2.7 per cent larger than in 2012. Beef RPCE has also grown in 2013 with monthly figures exceeding year-ago levels in every month except January. July’s RPCE was 2.3 per cent higher than last year and brought YTD RPCE to $151.79 (in year-2000 dollars), 3 per cent higher than last year. Chicken RPCE has been up and down this year but has been at or below year-earlier levels in each of the past three month. July chicken RPCE was $10.30 (also in year-2000 dollars), 3.2 per cent LOWER than last year. Year-to-date chicken RPCE is now 0.2 per cent lower than last year.

Turkey RPCE has been abysmal this year but Dr. Tom Elam of FarmEcon LLC points out a serious flaw in the data we use for RPCE: USDA’s retail turkey price is for whole birds which represent only a small portion of retail turkey sales except in Q4. No other retail turkey prices are, to our knowledge, available from public sources.

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