The food industry is facing unprecedented challenges today, with needs and situations changing hourly. At the National Pork Board, we recognize that many of the challenges impacting retail, foodservice and processors are beyond our collective control. But during this time of disruption, we remain committed to being a reliable partner you can count on to provide accurate information and solutions.  

With this in mind, we will continue to provide our data- and research-backed Insight to Action content each week, and we will provide solutions and ideas whenever possible to help you navigate a path forward.  

Beyond our traditional content, we’ll also be linking to consumer-facing digital content we’ll be sharing during the next several weeks. As consumers will undoubtedly be shopping, cooking and eating much differently, we’re providing meal ideas that allow them to feed their families while stretching their food dollars. We encourage you to help us amplify this content on your own (corporate or personal) social media channels. 

As always, if there is anything you need from the National Pork Board or if you have any issues you’d like to see us address, please don’t hesitate to reach out. We’re in this together, and our goal is to help you succeed. 

Pork Deli Meats Continue to be Competitively Priced 

Last week’s issue highlighted some of the characteristics that make deli meats such a draw for consumers.  They are convenient, nutritionally dense and have great flavor. These are great attributes to work with if you are a marketer. But for purchasing managers, cost is always the key variable. Fortunately, pork delivers on this as well. 

Pork raw material costs are lower today than 10 years ago. While there is a wide array of raw materials used for deli meats, the two main ones are ham and 72CL pork trim.  As the chart below illustrates, the cost of these products today is lower than what it was 10 years ago. 

In the first two months of 2020, the average value of the ham primal was 63.7 cents per pound compared to 64 cents for the same two-month period back in 2010. Current ham value is about 12% lower than the average price for all of 2010. Similarly, the average price of 72CL pork trim in January and February was 62 cents per pound compared to almost 69 cents per pound in 2010. These calculations use nominal prices. If we were to adjust these prices for the rate of inflation, they would be substantially lower than in 2010. This presents retailers and foodservice operators with an excellent opportunity to provide value to customers while at the same time maintaining strong margins. The current situation is not an anomaly; prices in recent years have been largely stable and lower than in previous years. The only time when we saw significant price inflation was in 2014 due PEDv related supply losses. 

Ham raw material remains competitively priced vs. other proteins 

Together with ham and salami/pepperoni (pork trim), roast beef and turkey breast represent two other ubiquitous items in the deli case. Pork raw materials have been traditionally less expensive than beef and turkey, and that trend continues. In the last 10 years, ham raw material costs have declined relative to beef inside rounds (used to make roast beef) and B/S turkey breast. 

The value of the ham primal in 2010 traded at an average 0.4 multiple to the price of inside rounds and 0.34 multiple to the price of B/S turkey breast. While the price multiples have been relatively volatile in the last 10 years, the general trend has been down. In the first two months of 2020, the price multiple to beef inside rounds was just 0.28 and the price multiple to turkey breast was 0.34. Ham and pork trim raw materials are even more competitive today than they were a decade ago.   

Outlook for spring/summer market 

Prices may be low today but what should buyers expect to see this spring and summer? As all who participate in commodity markets well know, volatility is par for the course. Fears about demand have negatively impacted meat markets across the board, and that includes the hog market. June hog futures were trading as high as $94/cwt last October. Even at the start of the year, futures traders thought hog prices in June would be around $90/cwt. As of mid-March, June hog futures are down to $70.4/cwt and hog prices for all of 2020 are now priced under last year’s levels. Ample supplies of pork and competing proteins, the risk of further supply disruptions and fears about consumer demand have permeated the market.  Our expectation is for food demand to be less impacted than demand for other products (vacations to Italy for instance). Given the news in the last three days regarding state response efforts to COVID-19, consumers are likely to rely on retail purchases for a larger share of their meals for the next several weeks. Deli products stand to gain as a result, offering convenient, nutritionally dense and above else good value.   

Learn more about deli meat at NationalDeliMeatMonth.org. There, you can download logos, infographics, fact sheets and other tools you can use online, on social and in store. 

This economic analysis is provided by Steiner Consulting Group.

Angie Krieger

Angie Krieger

Assistant Vice President, Channel Outreach

National Pork Board Cell: 319-594-4000 akrieger@pork.org