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By Angus Brown | Source: MLA, ABARES.
Saleyard cattle prices spent much of the first quarter of this year falling, yet domestic consumers failed to see the benefits. At the end of March, retail beef price reached a record high, seemingly pushed by export competitors and the price of substitutes rather than by the cost of cattle.
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Retail beef prices, as reported by Meat and Livestock Australia (MLA) from data provided by the Australian Bureau of Agricultural and Resource Economics (ABARES) pegged beef prices at $20.25/kg in the March quarter (Figure 1).
For the first time ever retail beef prices came in higher than $20 in March, gaining 3% on the December quarter, and 4% on March 2018. Figure 1 shows that retail margins are continuing a rise that started back in June 17. At that time, the retail premium over the National Trade Steer was at a low of 202%. In March this year, the rise in the retail price, combined with falling cattle prices, saw the premium move to a four year high of 302%.
For the ten years to 2015, retail beef prices averaged a 345% premium to the National Trade Steer, so perhaps rising beef prices and falling cattle prices are still just returning things to normal.
When we compare retail beef price to competitors for the consumer dollar, we can see the price rises might be getting some help from demand. Figure 2 shows retail lamb prices also hit record highs in March, lifting 3.7% on December and a massive 15% on March 18.
The strong rise in lamb prices was no doubt driven by higher saleyard values, and it looks like it has helped retailers price their beef higher. Interestingly chicken prices also hit a record high in the March quarter but remain well behind red meat counterparts.
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Retail chicken prices in March were 562.5¢/kg, 3% higher than December and 4% up in March 18. The previous record of 560¢ was set in March 2015. Rising grain prices, and therefore feed costs, are likely pushing chicken prices higher.
Key points
* Retail beef prices reached a record high in March despite falling cattle prices.
* There is still some way to go before retail beef is back at the average premium to saleyard values.
* Higher lamb prices are helping push retail beef values higher, with falls seemingly unlikely.
What does this mean?
We keep talking about the upside potential in the cattle market and record retail beef prices support this theory. While retail beef prices haven’t reached their historical premium to cattle prices, there is room for cattle prices to rise, without retail beef prices having to increase.
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With lamb prices running hot at the retail level, beef is now at just a 15% premium to lamb. While lamb did get within 5% of beef in 2011, it looks unlikely beef prices will fall to see the gap narrow. This is good news for cattle producers, with the domestic market still being our largest single beef market.
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