Source: Tom Johnston, MEATINGPLACE, 12/20/11

Meat spread data published by USDA bodes well for pork and beef processors and grocers because consumers are showing little pushback to retail prices, JP Morgan analyst Ken Goldman wrote in a note to investors.

Wide retail spreads in beef and pork (an all-time record of $1.96 per pound in November, for example) suggest volumes are robust and consumers continue to pay up for those animal proteins, a particularly positive trend for the likes of Smithfield Foods and Tyson Foods.

“When consumers and retailers are willing to pay up for meat, it resonates throughout the supply chain and helps keep wholesale prices high,” Goldman wrote. “So the wide retail spreads in beef and pork indicate that Tyson and Smithfield should continue to be able to charge solid prices for these items. For chicken, the story is less clear, as retail prices are not moving up quite as quickly as wholesale.”

Although retail beef prices hit another all-time high in November, retail beef price spreads did not set an all-time high for the first time since May.

“We do not want to make too much out of one month’s data point, and retailers continue to make great margins on beef vs. historical averages; however, should the spread continue to narrow, it may suggest that consumers are pushing back,” Goldman wrote.

Meanwhile, retail chicken margins decreased somewhat in November.

“We would be surprised if during tough economic times, retailers cannot make outsized margins with chicken when they are doing so with the more expensive meats of beef and pork, but this seems to be the case today,” Goldman wrote.

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