February 16, 2010

US winter storm to have slim effect on wholesale meat prices

Despite a boost in sales of meats and other food products from grocery stores just ahead of the latest massive winter storms, the event is expected to have little impact on US wholesale prices overall for most meat cuts.

The disruptive effect for winter storms hits equally across the sector, from livestock producer and processors to retail sales, so the effects of slowed demand and tightened supplies tend to offset one another. That usually results in only modest changes in wholesale prices.

That is being seen in wholesale meat prices as measured by the USDA. The price of slaughtered hogs - known as the pork carcass composite price - on Wednesday (Feb 10) was US$68.71 per hundred pounds, up only 45 cents, or 0.7%, from the Jan 29 figure. The wholesale price for the choice beef grade - the second-best grade - on was US$138.77, down US$1.96, or 1.4%, from Jan 29.

USDA showed boneless/skinless chicken breast prices into the northeast US Wednesday at a weighted average of US$1.36 a pound versus US$1.32 on Jan 29, but analysts had been predicting a seasonal rise so it was not a surprise. Most of the increase occurred last week.

A winter storm swept across the upper Midwest Tuesday (Feb 9) and early Wednesday (Feb 10) then picked up even more steam and moved east toward the heavily populated mid-Atlantic region. For some areas, this is the second major storm in less than a week and caused numerous businesses and the federal government to close temporarily.

Meat brokers and industry participants said the back-to-back storm systems that hit the mid-Atlantic region caused delays and disruptions in deliveries of food and grocery shipments to warehouses, distributors and grocers. Losses of food products are expected to be minimal because most of the trucks were held at the point of shipment and the trailers are temperature controlled.

Shoppers converged on the supermarkets just ahead of the arrival of the storm last week and stocked up on extra food, beverages and other grocery items, said Bruce Longo, analyst with Urner Barry's Yellow Sheet in Toms River, N.J. There was another round of purchasing by consumers early this week ahead of the second storm's arrival. Once the heavy snowfall began, store traffic declined sharply as most people went home and stayed there, he said.

The severe storms have disrupted deliveries to all metropolitan areas along the East Coast from Washington/Maryland north into New England, Longo said. Some of the local or regional meat and poultry processors were forced to shut down temporarily as well, he said. This may mean short-term shortages of some products and higher wholesale price quotes, but the markets typically return to normal soon after the weather conditions improve.

Based on past weather events, grocers are expected to purchase some additional product to restock the shelves but do so cautiously because of uncertainty about demand and overall sales activity in the days ahead, Longo said. As it is, the second half of February is generally a slow sales period for fresh meats due to tightened food budgets, higher heating bills during the winter and left-over credit-card payments due from holiday shopping in December.