May 10, 2007

US beef demand yet to flare up

US retailers and foodservice operators are earnestly waiting sales results on Memorial Day (last Monday of May) and Independence Day (July 4) as good figures tend to indicate that prices for grinding beef tend to spike up for much of the US summer and into autumn.

The weather ideal for outdoor barbecues is a key influencer of sales over the grilling season.

Beef sales this spring have failed to showcase strong growth with wet weather in many regions dampening demand. In an attempt to boost sales, retailers are currently aggressively promoting steaks.

In light of subdued sales, wholesale beef prices (particularly middle meats) have defied normal seasonal patterns and have fallen in recent weeks. Processors, in response, have lessened slaughter levels in the expectation that cattle prices will draw back. However, tight supplies of fed cattle have meant that live cattle prices have held up, thus, processor margins are seen to move into red.

Foodservice sales are also sluggish with the latest survey from the US Restaurant Association (February data) revealing that quick service and quick casual were the only two concepts showing growth in sales. Family dining showed the largest drop in sales followed by fine dining. Subdued sales are likely a result of deteriorating disposable incomes, a slowing economy, declining housing values and high gasoline prices.

Prices for competing meats such as pork and chicken remain significantly higher this year and this trend should provide some support for beef prices to go forward. However, trends in oil prices and disposable incomes are likely to be bigger influencers on demand over the coming months.