The ‘mainstream media’ jumped on the rising inflation story from Consumer Price Index (CPI) data released last week. Farmers are interested in the CPI, as it impacts interest rates, but we need to delve deeper into the market for the potential impact on livestock markets.
The headline CPI number was 1.8% for the quarter, taking the annual CPI up 7.3%, which as everyone knows is way above where the Reserve Bank would like to see it.
Gas and household fuel was the big ticket increase, up 10.9% for the quarter, while the Food and non-alcoholic beverages category was up 3.2%, taking the annual rise to 9%.
Within the food category come meats, and we have seen the rise in retail red meat prices slow. Figure 1 shows that after a massive jump in the March quarter, beef prices have largely gone sideways in the last two quarters.
Beef retail prices are still up 9.3% at an annual level, so still in front of the CPI and the food and beverage category. We can also see in figure 1 that beef price increases have far outstripped other meats and the CPI over the past 10 years. Rebounding finished cattle prices will have wiped out any margin benefit retailers saw from lower cattle prices in the September quarter.
Lamb prices dropped at the retail level in September, which was likely a response to cheaper prices at saleyards during the quarter. The fall was only in the order of 1.3%, and the annual rise is still 5.5%. Lamb prices at saleyards were down 20% on last year in the September quarter, with retailers clawing some margin back.
The price of chicken makes for an interesting study. After many years of static prices chicken has taken off at the retail level gaining 8.5% over the last year. Grain prices have risen before without really impacting chicken prices, but this time it seems it might be labour issues and rising energy costs which are flowing through to chicken prices.
Figure 2 shows the annual change in meat prices along with the CPI. Chicken has almost risen as much as beef over the last twelve months, while lamb and pork have risen less than the CPI.
What does it mean?
All meats compete for consumer demand, and while chicken is still much cheaper than lamb and beef, rising prices do provide some support for lamb and beef demand. With consumers seemingly used to the higher levels of 2022, it would take a long period of lower livestock prices to see retail prices fall.
Key Points
- The CPI continues to rise, but red meat prices have remained static for two quarters
- Chicken prices have continued to rise, likely driven by labour and energy costs.
- Beef remains expensive relative to other meats, but rising chicken will provide support.
Click on figure to expand
Click on figure to expand
Data sources: ABS, Mecardo
