May 15, 2009

Grocers are expected to continue to offer consumers a variety of meat and poultry cuts through the end of the month, but the mix will include more grilling items.

Supermarkets designate a certain amount of space in their meat counters to each of the three main protein categories, and they are reluctant to make any significant changes in the displays from week to week, analysts and meat wholesalers said. The stores have limited flexibility in adjusting the amount of space to be given each category for everyday business.

 

Certain areas of the meat cases are reserved for feature items only, and the products found in those locations vary from week to week depending upon what is being promoted.

 

Basically any fresh meat or poultry cut that can be prepared on a grill is, or soon will be, available to shoppers leading up to the Memorial Day holiday, analysts said. The weather is now more dependable, and warmer temperatures are moving into the northern areas of the country, so grocers hope to benefit by increased backyard grilling activity.

 

Expectations of better demand for the premium beef steaks such as T-bones, rib-eyes and strips have encouraged grocers to include more of these cuts in their weekly advertisements. Many consumers are willing to pay more for a premium steak because they expect it to taste better and be more tender off the grill than a lower quality one.

 

Grocers are reluctant to break out of a pattern in offering a varied mix of protein options, but some did boost the number of beef items promoted this week, said Bruce Longo, analyst with Urner Barry's Yellow Sheet. This may be in response to better grilling weather, he said.

 

Analysts said some shoppers also may be willing to pay a little more for the higher-quality cuts at their local grocery store and cook at home rather than dine out. By doing so, they still spend less money overall for the meal.

 

Several grocers featured ground chuck or round this week along with regular hamburger and some roast items. Analysts said the seasonal transition is toward more grilling items and fewer roasts as outside temperatures warm up. The result is less demand for roasts, which come mainly from the chuck or round.

 

For the Memorial Day holiday, the beef category should be well represented by hamburger and the leaner ground beef items along with numerous steaks.

 

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$3.60 a week ago and US$4.00 a year earlier.

 

Feature activity this week for pork cuts was better than some analysts and brokers had expected three weeks ago when the AH1N1 influenza cases were first reported.

 

Initial concerns about pork demand due to the use of the term swine flu appeared to have slowed sales temporarily in certain areas of the country. Temporary bans by some countries on imports of pork from Mexico and several US states have slowed sales internationally, which has caused a backup in supplies of certain cuts domestically.

 

Market analysts and brokers said domestic demand for the retail cuts - mainly loins, butts and spare-ribs - has improved. The pork carcass composite value has rallied US$6.29 per hundredweight, or 11.5 percent, from a four-month low hit on May 4.

 

A Midwest-based broker predicts that wholesale prices for loins and butts could extend the firmer trend for the next few days.

 

Tighter hog supplies and improved grilling demand also could be supportive for wholesale prices of the retail pork cuts. Prices for fresh hams and trimmings, however, may be under some pressure or upside moves could be limited by slowed export sales to Mexico and Russia.

 

Analysts said wholesale pork prices remain well below year-ago levels so grocers may see the category as an opportunity to feature more items from in late May and June.

 

This week, boneless centre cut chops competed closely in price with boneless/skinless chicken breast. The average price in the 10-city Dow Jones Newswires survey for boneless chops was US$2.82 compared with US$2.73 for boneless chicken breasts.

 

The 13 cuts of pork in the survey averaged US$2.27 a pound, versus US$2.25 last week and US$2.45 a year ago.

 

Chicken was slightly more prominent in the printed advertisements this week, as some analysts had been expecting. Increased seasonal featuring of chicken and capturing a few ad spots away from pork in certain areas of the country contributed to the wider displays, analysts said.

 

Wholesale prices for boneless/skinless breasts have risen slightly in the past two weeks with the US Department of Agriculture quoting steady to five cents a pound higher for load quantities on a delivered basis into the north east. Bone-in breast prices at the wholesale level are up eight to nine cents a pound from two weeks ago. Leg quarters are seeing some strength too and have risen by about four cents from two weeks ago.

 

Broiler processors continue to restrict production. The USDA reported broiler egg sets in the latest week down 6 percent from a year ago, the same percentage decline from a year ago seen in the previous five weeks.

 

Breast meat prices are expected to be fully steady to firm over the next few weeks on improved seasonal demand and the production cuts that have occurred since last fall.

 

Poultry market fundamentals have improved, said Tyson Foods (TSN) in a press release Wednesday. "Pullet placements, an indication of future broiler supplies, have been down the past five months," compared with a year ago, the company said. In addition to a 6 percent reduction in egg sets in recent weeks, cold storage inventories of poultry have declined about 20 percent since peaking in November 2008, the company said.

 

The four cuts of chicken had an average price of US$1.53 a pound, compared with US$1.49 a week ago and US$1.51 a year ago.