March 6, 2009

After struggling through slow sales in February, grocers across the US are hoping for an early arrival of spring-like weather and increased backyard grilling activity to spark more meat purchases.

 

For now, as has been the case in recent weeks, grocers are offering shoppers a broad mix of protein options. This week, they included seafood and fish for the Lenten season along with several cuts each from the beef, pork and poultry categories.

 

Some supermarket chains also featured more processed meats such as smoked sausages, cold cuts and hot dogs as lower-price options for families on a tight food budget.

 

Widespread concerns about the economic crisis have led to a general lack of confidence among consumers, and that is being reflected in what they buy at the grocery stores and how much they are willing to spend, analysts said. Consumers are purchasing less of the higher priced meat cuts by trading down to cheaper alternatives in an attempt to stretch their food dollars.

 

The slowed movement of meat and poultry products overall has caused grocers and secondary suppliers to be cautious buyers and hold smaller inventories. This has contributed to the slow pace of sales at the wholesale level.

 

Grocers included a fair number of beef cuts in their printed advertisements this week in an effort to capture additional sales dollars at the beginning of the month. Several of the supermarket chains featured whole beef rib-eyes or strips at reduced per-pound prices from US$3.99 to US$4.99. These are well under the prices normally charged for the smaller size packages that contain from two to four steaks.

 

Wholesale choice-grade beef prices last week hit 3 1/2-year lows. Bruce Longo, analyst with Urner Barry's Yellow Sheet, said the company's quote for choice-grade 600 to 900 pound carcasses is currently about US$133 per hundredweight, which is down nearly US$20 from a year ago.

 

Some grocers are booking beef for forward delivery amid speculation prices will move up. The volume of beef traded so far, however, has not been large because buyers are cautious about over-booking and having too much product left after the promotions have occurred.

 

Longo said packers are offering the end cuts - rounds and chucks - at discounted prices in an effort to move the excess inventories. He said some packers are holding surplus stocks of these cuts because of slowed clearance in the stores in February.

 

Some grocers may offer bargain prices on ground chuck and/or round later this month as a way of selling the surplus inventories of those cuts, analysts and brokers said.

 

The average price of the 15 cuts of beef in the Dow Jones Newswires survey this week was US$3.62 a pound, compared with US$3.87 a week ago and US$3.94 a year earlier.

 

While pork is well positioned price wise between the more expensive beef and the cheaper chicken categories, the impact of the weak economy is being felt in this complex as well, analysts said. Consumers are buying fewer of the premium-priced pork items and branded products and trading down to the cheaper items.

 

This has resulted in deeper price cuts than normal by grocers to keep the products moving through the meat counters. Some supermarket chains have been featuring more bone-in chops and less of the higher-priced boneless chops.

 

Some store groups are also promoting more spare ribs and items produced from the shoulder butt such as steaks, roasts and country-style ribs since these products can be offered at attractive price points.

 

Analysts said grocers will likely continue to keep some fresh pork items in the lead spots in their weekly advertisements throughout the balance of the month because prices are competitive and supplies remain readily available.

 

A Midwest-based meat broker predicts wholesale prices for most of the retail pork cuts are near a seasonal low and could begin to move up soon. How rapidly and to what extent the gains occur could be determined by how shoppers feel about the economy, he said.

 

The 13 cuts of pork in the survey averaged US$2.25 a pound, versus US$2.26 last week and US$2.10 a year ago.

 

Wholesale prices for boneless/skinless chicken breasts on a delivered basis into the northeast US have rallied about 20 cents per pound in just the past two weeks. Prices were under pressure in February, a period of slow demand in general for meats and poultry. Reduced production since late summer has limited the amount of product available, resulting in a shorter down cycle for prices, analysts said.

 

Also, recently announced further cutbacks in production along with expectations of improved demand into the spring and early summer are considered supportive for prices now and into the weeks ahead. Expectations for prices to move higher into the early summer could also cause retail meat buyers to book a few extra loads to make sure they have their needs fully covered for the weekly promotions.

 

The US Department of Agriculture's latest report released Wednesday showed a 6 percent decline from a year ago in the number of broiler eggs placed into the incubators in the 19 leading chicken producing states. The average of the past 12 weeks has been a 7 percent decline in egg sets and a 6 percent decline in chicks placed into the growing houses. From mid-September through early December, egg sets were down nearly 8 percent from a year ago.

 

USDA on Wednesday (March 4) also reported wholesale prices for boneless/skinless breasts in the northeast US at US$1.45. Last summer, boneless/skinless breast prices peaked in early May around US$1.65 a pound, turned weaker after the Memorial Day holiday then rallied back to around US$155 in late June and early July, according to USDA's daily market reports. Prices then slid back to around US$1.30 by the end of July.

 

Production declines since late summer and a seasonal improvement in demand are expected to be supportive for prices in the coming weeks and months. Some analysts predict that boneless/skinless breast prices could reach US$1.75 a pound by the summer. There may be some setbacks in prices at times, so the wholesale markets could trade in a choppy fashion.

 

The four cuts of chicken had an average price of US$1.41 a pound, compared with US$1.34 a week ago and US$1.46 a year ago.