Retail meat competition is more intense - and that’s good for producers

Strong demand is the best cure for the ills that growing supply and low prices produce.

As North America’s meat supplies continue to increase and as meat prices continue to decline, we may see a strengthening consumer demand play out at the retail level. And that will help relieve some of the downward pressure on Canadian cattle and hog prices.

Retail beef and pork prices move down – way down – from highs

Consumers paid less for meat in 2016. According to the latest consumer price index, retail prices for beef and pork declined by 4.4% and 2.7%, respectively, year-over-year. Chicken prices barely moved over the same time period.

*Annual price changes, September

Those lower retail prices give consumers a much needed break, which should translate into greater sales of meat, especially red meat. They follow two consecutive years of dramatic price increases. Beef prices moved up a whopping 18% in 2014 followed by another 12% in 2015. Pork prices increased 5% in 2013, followed by 14% in 2014.

In contrast, the retail price of chicken has remained relatively flat for the last five years with average annual increases around 2%. This is certainly a factor in explaining the growth in chicken sales, with per capita consumption growing 6.2% annually since 2010.

During that same period, pork consumption increased modestly by 2.6% while beef declined 12.7%.

Cattle, hog producers may feel less pressure

Large meat supplies in the North American marketplace are here to stay. There’s a lot of meat to move either through the domestic supply chain or in international markets. Moderation of domestic retail prices for red meat will help move some of those inventories.

They’ll shift the patterns in meat consumption we’ve seen most recently. Beef and pork are becoming more competitive with chicken as a result. Chicken consumption is bound to remain strong, given the evolution of food preferences and demographics. But lower red meat prices may be just what the doctor ordered for farm cattle and hog prices to recover.

The U.S. Department of Agriculture’s monthly report on world agricultural supply and demand estimates is an excellent tool to monitor the overall balance between supply and demand of proteins. And we’ll continue to monitor trends in this blog.