The adage that beef is the “meat treat” and chicken is the “survival food” has never been truer than at present. Retail beef sales boomed during the pandemic, but food inflation has literally taken a bite out of those sales, with Americans turning more to chicken to feed their families. That’s especially true of those in the lower- and middle-income groups who could afford to buy higher-priced beef items when they were flush with federal stimulus money. After that ended and inflation set in, they traded down in all their protein purchases.
The live cattle and wholesale beef markets had been hoping that strong retail beef sales over the Memorial Day holiday would give the markets a much-needed boost in June. But retail sales were mixed and food service sales were on the slow side. Retailers before the holiday featured beef far less aggressively than expected given that wholesale beef prices were much lower in May than last year. Features were notable for their scarcity and relatively high prices.
April retail beef prices showed how retailers kept their prices high. USDA’s All Fresh beef price averaged $7.37 per pound, up 13.7 percent from April last year. Choice beef prices averaged $7.74/lb., up 14.5 percent. Analysts say retailers are continuing to maximize their beef margins and are comfortable with the volume they are selling. Even if they sell less volume, higher prices make them a lot more money. Retailers also say consumers are being increasingly impacted by food inflation and are buying more chicken as a result.
Retailers might lower their beef prices somewhat in June. But any declines are likely to be insufficient to prevent a decline in wholesale beef prices and live cattle prices. The latter topped out at $143.42/cwt live the week ending May 8 and might not get above that level until late in the third quarter.
Meanwhile, USDA’s latest forecast for 2023 beef production is that production will decline 6.8 percent from 2022 to 26 billion lbs. This would mark a second year of lower production, following the record set in 2021. It will be the lowest production level since 2016. With lower expected beef production contributing to higher expected prices in 2023, aggregate domestic beef disappearance next year is expected to decline almost 7 percent to the retail equivalent of 55.1 lbs. per capita, compared with 59 lbs. in 2022. This will be its lowest level since 2015.
Less beef in the next year or so means chicken demand will continue to boom. Not only will beef continue to sell at retail prices three times higher than chicken, but chicken will continue to win out if food inflation continues. One of the largest impacts on poultry so far in 2022 has been the continued increase in demand, which initially saw a big rise in March of 2020 at the onset of the COVID-19 pandemic.
Chicken has grown to be a $13.7 billion category at retail and it is still very strong relative to other proteins, according to the latest data from IRI. Even though in the last year dollar growth flattened by 0.5 percent, chicken sales are up 14 percent compared to 2019. Chicken was not all that different from the other proteins during the pandemic, says IRI’s Chris DuBois. Protein manufacturers had to deal with so many production issues and overwhelming demand. Over the last 26 four-week periods, meals made at home averaged between 77-83 percent, and IRI believes this percentage will remain elevated.
IRI data also shows that while production issues and supply chain issues hampered everyone, volume basically remained elevated for meat compared to 2019. Consumers have learned to cook, and their meat purchase routines have changed. Most Americans are buying a broader assortment of meat cuts than they did prior to the pandemic. Cooking skills are improving, and comfort with different cuts and proteins has increased, says DuBois.
Chicken breasts are still the biggest sellers at 58 percent of total chicken sales, but wings and boneless thighs continue to steal the show, IRI data shows. Wings are up again almost 14 percent to $1.4 billion, and that is just in retail. They are also up in food service, says DuBois. Boneless thighs have also had strong growth, says IRI. While they are a little smaller than wings in size, boneless thighs have become a must-have category in almost every supermarket. The rise of dark meat has been a huge multiyear trend.
The American chicken industry was built on boneless, skinless chicken breasts, and dark meat was largely an afterthought. But for the last three or four years, dark meat has been growing much faster than white meat, and it might be one of the most important changes across the meat case, says DuBois. That is certainly food for thought. — Steve Kay
(Steve Kay is editor/publisher of Cattle Buyers Weekly,an industry newsletter published at P.O. Box 2533, Petaluma, CA, 94953; 707-765-1725. Kay’s Korner appears exclusively in WLJ.)
