Harrington's Sort & Cull
John Harrington DTN Livestock Analyst

Friday 02/21/14


I can imagine the cry of some meat department managers as they desperately explained to "corporate" why January beef margins proved to be so ugly. Grocers just hate to be caught off guard when it comes to either supply or pricing.

But judging by new meat spread data just released, somebody at Krogers et al was caught asleep at the wheel.

Despite the fact that the fed cattle market exploded last month, averaging more than $11 higher than December and $17 above January 2013), the average retail price of choice beef totaled no more than $5.346, 1.4 cents LOWER than the previous month.

Butchers did manage to mark the average price of all beef higher in January, but only by less than a penny.

This unusual disconnect allowed the farm share of retail spending to soar like Maddie Bowman in the halfpipe. Specifically, the farm share of beef's retail dollar in January totaled 55.8%, significantly higher than the three-year average of 50.3% and constituting the largest piece of pie served to beef producers since the summer of 1993.

Of course, good news for Stetsons was bad news for paper hats surrounding the meat case. Retailers saw their share of the beef dollar fall to 36.6%, way below the 2011-2013 average of 43.8% and the meat department's sorriest take since December 2000.

Blaming this margin embarrassment on some kind of country "ambush" surely didn't play well among the executives at Safeway and Whole Foods. Even those just casually informed had read stories of historically low cattle numbers and the serious threat of short beef supplies.

Yet if yelling "ambush" is a dubious strategy, marking prices sharply higher is a sure winner. I thought consumers might be traumatized by sticker-shock as early as January. But apparently they were relatively safe until this month and next.

The retail margin correction now unfolding could prove to be a real beef demand killer.

For more of John's comments, visit http://feelofthemarket.com/…


Posted at 5:16PM CST 02/21/14 by John Harrington
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