US consumers tighten spending on meat; sales soft

The weak US economy has caused many households to tighten spending on meat as February sales - usually a slow month--becomes more sluggish.

 

Grocers are attempting for a mix of meat and poultry products to pull more customers and generate more total sales dollars and margin.

 

Grocers are looking forward to an increase in store traffic and sales in March as February is merely for Valentine's specials such as candy and flowers as well as mainly a dine-out holiday, reveals a shop owner.

 

Retail meat buyers and processors are doing some business for deliveries in late February and March, analysts said.

 

 

Grinding the chuck or round is a way for the stores to merchandize those cuts in order to keep inventories in balance during periods when sales of roasts have not kept up with expectations or production. Demand for the various cuts changes seasonally so grocers alter their merchandising methods to maximize their returns but also to keep from developing a backlog of any particular cut of meat.

 

Kevin Bost, president of Procurement Strategies Inc., said February is a poor sales period for beef retailers but confident of a better sales flow in March. Beef processors are asking higher prices for beef middle meats to be delivered in March but the premiums are not as high as they were, he adds, as there are more attractive deals available now for buyers than there were two weeks ago.

 

Wholesale beef prices have been down during the past two and a half weeks. According to the US Department of Agriculture, the choice grade cutout value has slid for 11 consecutive days and was weaker again in the midday Thursday report. Select beef prices have fallen in 10 of the last 11 days and were also weaker in the midday quote. Based on the USDA's midday prices, choice beef values have fallen US$13.33 per hundredweight, or 8.7 percent since January 20. In the same period, select beef was down US$9.70, or 6.7 percent.

 

Summer's grilling activity in the southern areas of the country may boost sales and demand in March As the warmer weather moves north, sales of grilling cuts will gradually improve.

 

The average price of the 15 cuts of beef in the Dow Jones Newswires survey this week was US$3.73 a pound, compared with US$3.85 a week ago and US$3.71 a year earlier.

 

 

Jim Kenny, analyst with Urner Barry's Yellow Sheet, said pork is available due to a slowed export sales, especially to countries other than Japan that were large buyers in 2008. Also, production is still quite large despite being down a bit from a year ago.

 

Kenny said loin prices, compared with other cuts, have been lagging behind. Sales of boneless loins slowed and prices declined. Some packers then reduced their boning operations and began to offer more bone-in loins for sale, now there are ample supplies of those as well, he said.

 

Both Bost and Kenny considered boneless loins as the best bargain or opportunity for grocers. They also predicted prices will move up in March on tightened hog supplies and expectations of better demand.

 

Bost predicts that weekly hog slaughters during February will be near a year ago but dip by about 3 percent in March, compared with 2008. He expects a further decline in April to about 6 percent below a year ago.

 

The 13 cuts of pork in the survey averaged US$2.23 a pound, versus US$2.32 last week and US$2.24 a year ago.

 

 

High feed costs and tight to negative margins initiated huge reductions in egg sets late in the summer and early autumn. The US Department of Agriculture reported egg sets in the 19 largest producing states for last week at down 9 percent from a year ago. The eggs set estimate for last week was just under 199 million, the lowest since the week-ended November 8.

 

Eric Scholer, analyst with EMI Analytics Inc., said the production cutbacks are supporting stronger market prices for chicken. The soft economy, however, is partially offsetting the cutbacks so prices have not moved up as much as some people in the industry had hoped or expected.

 

However, rebound in prices and declines in feed costs are improving the profitability outlook for processors. Prices may weaken next week or two, however, on slowed sales even with production reduced, Scholer said. Prices are expected to begin a slow rebound by late February or early March on improved domestic demand and more activity expected in the export markets.

 

Because of cutbacks that are already in place in poultry and livestock production, there should be less total protein available going forward. The amount available in domestic supplies will depend on how much is exported, Scholer said.

 

The four cuts of chicken had an average price of US$1.41 a pound, compared with US$1.37 a week ago and US$1.39 a year ago.