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CME: Beef Retail Prices Accelerate During November, December 2019

20 January 2020

US - Beef retail prices accelerated in the last two months of 2019, writes Steiner Consulting Group, DLR Division, Inc.

The average December retail beef price was pegged at $6.09/lb., 0.4 percent higher than the previous month and 4.4 percent higher than a year ago. This was the highest December retail beef price since December 2014.

Higher wholesale beef prices in November, especially the big jump in the value of end cuts, likely caused retailers to mark up beef items in the meat case. The average price of the various steak cuts sold at retail in December was $7.709/lb., 1.7 percent higher than a year ago.

On the other hand, the average price of chuck roasts was up 10.2 percent y/y, chuck ground beef was up 9.6 percent, beef round roasts were up 5.8 percent and overall ground beef prices increased 3.7 percent from a year ago.

While there is a lot of talk in the market about the potential demand from export markets for all US protein, higher retail prices will likely make beef less competitive vs. other proteins. Longer term protein demand is a function of two key factors: the economy (jobs and disposable income) and consumer preferences. Those two factors are in excellent shape.

The unemployment rate is currently at the lowest level it has been in decades and disposable incomes continue to grow. Just as important is the shift in consumer preferences. Yes plant based diets and products are getting a lot of press but the big story out there is the shift in consumer preferences away from carbs and low fats to diets that are high protein and high fat.

The most popular diet of 2019 was the Keto diet. But while longer term beef demand, and demand for proteins overall, remains in excellent shape, in the short term we could see some variability driven by the relative competitiveness of products and how retailers decide to structure features and the meat case from one promo window to the next.

It appears that high prices in December and ample supplies of low priced pork and chicken have created some short term headwinds for end cuts at retail, with features of chucks, rounds and some ground beef items down substantially from a year ago.

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