September 4, 2024 - Trey Freeman, Ever.Ag
The impact of inflation in the food space has consumers changing what and where they buy. Though July retail sales topped expectations, the growth in total dollars spent trailed growth in prices in both the restaurant and grocery sectors. In short, consumers are paying more and getting less. The gap in total dollars spent versus growth in prices was larger in the restaurant sector, suggesting that consumers are shifting from spending on food service and are instead opting to pick up food at grocery stores.
On the surface, this shift appears to be a function of grocery store prices rising at a slower rate than at restaurants. However, within the meat case, beef may not be faring well among value-conscious consumers. The all-fresh beef retail price for July was $8.15 per pound (lb.), and data suggests consumers are opting away from beef when shopping at the grocery store. The Bureau of Labor Statistics reported ground beef at $5.50/lb., up 7.7% from July 2023, while chicken breast is down 4.7% to $3.95/lb. Shoppers looking for value might be turning to chicken legs at $1.79/lb., 11.8% less expensive than last year.
The slowing of consumer demand has cash cattle prices moving lower. Fed-negotiated trade in the South occurred at $182.00 -$183.00 per hundredweight (cwt.) last week, steady to a $1.00 lower than the previous week. In the North, cattle traded $183.00-$185.00/cwt. and $291.00-$292.00/cwt. dressed. That was $1.00-$2.00/cwt. lower than the previous week for both the live and dressed basis.
Packers continue to keep slaughter levels low, helping prop up boxed beef prices by reducing supply. In effect, dressed weights remain sky-high and are still climbing. Dressed weights for steers were last reported at 931 pounds, six pounds higher than the week prior and 26 pounds higher than a year ago. Dressed heifer weights were reported at 840 pounds, up one pound from last week and 20 pounds higher than a year ago. As long as packers keep slaughter levels low in order to support boxed beef prices, retail prices for beef at the grocery store will have a hard time declining.
With the potential for further slowdown in demand, managed money is taking some bets off the table. The latest CFTC Commitment of Traders report showed funds lightening their net-long position by 3,609 contracts to 41,656 contracts.
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