Retail Gets Larger Piece Of Farm-To-Table Price

On a monthly basis, retail grocers and restaurants are getting even more of the proceeds from the sale of beef, government data show.

The current climate of a growing US herd and rising beef supplies, coupled with rising demand from a growing economy are allowing this trend, market analysts said.  Further widening of the gap between retail and wholesale beef prices may be in the cards.

The data show clearly the wholesale-to-retail price spread widening over the last two years.

Market analysts say this happens in times of growing supplies.  Retailers are reluctant to move prices down much to attract more sales since this conditions shoppers to expect lower prices and makes it harder to raise prices when wholesale prices rise.  This is true of beef more than pork or chicken since beef is the more expensive of these protein-rich foods.

In January, the cutout-to-retail beef price spread was $1,192.98 per thousand pounds, the data showed.  This was $76.54 per thousand, or 6.86%, above the January 2016 value of $1,116.44 and $220.34 per thousand above the 2011-2015 average of $972.64.




And if the retail price of beef remains strong or even gains in strength, it would be natural to think cattle producers are getting a larger slice of the pie.  This appears to be true to a point, but January figures show a bit of hesitation.

January’s live-to-retail price spread was $1,345.20 per thousand pounds.  This was up only $22.78 a thousand, or 1.72%, from $1,322.42 a year earlier but up $254.08 a thousand, or 23.29%, from the previous five-year average of $1,091.12.

The choice steer value as a percent of retail beef value worked its way lower to 39.21% in October of last year, the lowest since before the start of the Great Recession in 2008, the data showed.  Since then, the number has risen to January’s 47.19%, the result of stronger domestic and export demand.

As a point of reference, the percent of retail beef value hit its most recent peak at 51.89% in November of 2014 as herd rebuilding was kicking in and stealing heifers from the pool of potential feeder cattle.




Average fed cattle exchange auction prices Wednesday were $1.36 per cwt higher at $119.02, versus $117.66 a week earlier.  However, only one trade was not from the Southern Plains where cattle sold last week at $120.21, and unsold cattle this week were from the north and were priced at $116 to $117.  Thus, in reality the market traded about $1.19 lower.

Little cash cattle trading was reported through Thursday at mostly $119 per cwt on a live basis, compared with last week at $119 to $120.50, mostly $119.75 to $120.50.  Dressed-basis trading was at $185 to $188, compared with $190 to $190.50.

The USDA’s choice cutout Thursday was up $0.88 per cwt at $189.22, while select was up $1.04 at $188.19.  The choice/select spread narrowed to $1.03 from $1.19 with 234 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Wednesday was $128.02 per cwt, down $0.41.  This compares with Thursday’s Mar settlement of $123.83, down $0.45.