March 27, 2009

Retail grocers are anxiously awaiting the start of this year's grilling season, which they expect to feed with increased meat featuring the first week of April.

 

The problem for them is they don't know if shoppers will view the first weekend of April as a time to begin ramping up their backyard grilling activities. No one expects consumers to skip the grilling season, but timing the start could be something of an art for the retailers.

 

Market analysts said this year's grilling season is beginning a bit later than in some years because of the recession, which is biting into consumer budgets. In many years, the first of the patio grills gets fired up in March, and the trend slowly grows as the practice moves north.

 

But this year, grocers and market analysts are planning for an April start to the season with fewer and smaller peaks in activity, the analysts said. Consumers don't really have the money, or the inclination, for a backyard barbeque when the weather also is a little iffy.

 

Consumers also appear reluctant to spend money, the analysts said. They explained that backyard get-togethers often involve extended family and friends.

 

However, grocers appear to be planning for increased features of steaks and hamburger for the first weekend in April, market analysts said. The last week of April and/or the first weekend of May also could bring increased interest in putting grillable products on special.

 

Troy Vetterkind, director of livestock analysis and trading for Vetterkind Cattle Brokerage, said grocers last week and this week are offering beef end cuts - roastable products - as they prepare for those grilling ads the first weekend of April. Products from the chuck and round don't work well on the grill, and grocers want to clear product from inventory.

 

Beef packers appear to be well booked for middle meats - steaks - and current slaughter rates are based on filling advance orders for the grilling products. That leaves the end cuts - chucks and rounds - hanging over the market, and packers are working hard to keep these products moving to retail and restaurant buyers at the same pace as the middle meats.

 

Retail prices for beef, even advertised products, aren't particularly attractive, though, despite retailers' ability to purchase product at distressed prices at the wholesale level. Vetterkind said the retail buyers are keeping the pressure on their suppliers for the time being.

 

That could change when they begin offering more grilling items, Vetterkind said. At that point, they may opt to give up a little margin in order to gain more volume, especially if they feel consumers are ready to buy more product.

 

The average price of the 15 cuts of beef in the Dow Jones Newswires survey was US$3.75 a pound, compared with US$3.60 a week ago and US$3.80 a year ago.

 

Pork packers have had a hard time moving enough pork loins recently, and product is stacking up, market analysts said.

 

This could result in some active featuring in April, Vetterkind said.

 

Bill Smith, market analyst at Urner Barry's Yellow Sheet, said "there's a tonne of pork out there." Saying stocks are burdensome probably is an understatement, he said.

 

Supplies of butts and other cuts also are ample, Smith said.

 

As a result, pork cutout values are declining as packers try to deal with the on-hand inventories, Smith said.

 

Buyers of pork "are afraid to open their mouths because they don't want to end up owning more product than they can use," Smith said.

 

Buyers also are reticent about booking large volumes of pork because they don't want to wind up owning product that is lower in price the next day, Smith said. At some point, wholesale prices will get so cheap that having lower prices the next day won't matter.

 

The next significant feature weeks could run the same weeks as the beef features, market analysts said. Grocers will be trying to hit consumers with grillable products they can afford, they said.

 

The average price of the 13 cuts of pork in the Dow Jones Newswires survey was US$2.20 per pound, compared with US$2.11 a week ago and US$2.26 a year ago.

 

Reduced production of chicken this year still isn't enough to turn the profitability of producers into a positive, said Eric Scholer, market analyst for EMI Analytics Inc.

 

Prices for many products are weaker, especially for breast meat, he said. Advertisements around the country this week show lower prices to consumers for boneless/skinless chicken breasts but little else is noteworthy.

 

Scholer said export markets for dark meat are underpinning the leg quarter markets, and wing markets are holding up surprisingly well amid the college basketball March Madness. Wings could remain firm in coming weeks, he said, because the production cuts are more noticeable for this diminutive chicken product.

 

Retail features of chicken have not been robust of late, Scholer said. This could change as the weather warms and consumers dust off their grills, but just as with pork, retail buyers are squeamish about stocking up when prices are closing lower.

 

The average price of the four cuts of chicken in the Dow Jones Newswires survey was US$1.41 per pound, compared with US$1.44 a week ago and US$1.55 a year ago.