August 10, 2007

  

US Retail Meat: Cheaper cuts prevail in tight budget week

 

 

Supermarket chains across the country are featuring mostly the cheaper meat and poultry cuts this week as they compete with back-to-school expenses for consumers' dollars.

 

Market analysts and wholesalers said meat-counter sales have been sluggish so far this month, with the slowed pace likely due to hot temperatures across much of the country and with many shoppers trying to stretch their food budget.

 

According to the National Retail Federation's latest survey of consumer intentions for back-to-school spending, conducted by Worthington, Ohio-based BIG research and reported on CNN.com, families with school-age children are expected to spend an average of US$563.49 on back-to-school merchandise. This is up US$36.41, or 6.9 percent, from the year-ago figure of US$527.08, the survey said.

 

Market analysts said that while some families may accrue money throughout the summer for back-to-school expenses, the majority likely purchase at least part of these goods using a credit card and will have higher payments due in September. Either way, the primary food shopper of the family will try to find ways to reduce spending. That may mean buying less meat - only what is needed for that week - selecting cheaper cuts or lower-cost non-meat alternatives.

  

The most featured beef items in the Dow Jones Newswires 10-city survey this week included ground products, more roasts and several mid- to lower-priced steaks from the chuck or round.

 

Some grocers offered shoppers their choice from among three or four different beef products at the same price per pound. A few of these included pork or chicken items as well.

 

A Midwest-based analyst said several supermarket chains in that region are promoting higher-quality ground beef products such as chuck, round or sirloin at more attractive prices. Some are also featuring roasts or steaks produced from these cuts. The analyst said since schools are not yet in session and the weather remains hot, shoppers are not buying enough of these cuts as roasts to clear the available supplies, so grocers are trying to merchandise the extra as ground products and other items such as kabobs.

 

Wholesale prices for the end cuts - chucks and rounds - are reported weak currently but are expected to turn firmer by the end of the month or into early September, when cooler temperatures arrive and demand normally increases.

 

The US Department of Agriculture's daily price reports showed the primal value for choice-grade chucks on Aug. 7, 2006, at US$98.44 per hundredweight. The value on Aug. 31, 2006, was US$103.28. The primal value for the round on Aug. 7, 2006, was US$115.34, and it climbed to US$125.60 by the end of the month.

 

The average price of the 15 cuts of beef in the Dow Jones Newswires survey was US$3.87 a pound, compared with US$3.74 last week and US$3.47 last year.

  

Most grocers elected to feature the cheaper mixed bone-in chops or centre cuts this week versus boneless. Analysts and meat wholesalers said grocers may switch to boneless loin chops next week for the middle of the month but could return to the bone-in cuts again for the last two weeks of August.

 

Sirloin chops, spareribs and country-style ribs also were commonly found in the printed advertisements this week and are expected to be featured throughout the month and for the Labour Day holiday. These cuts are often priced from US$1.99 to US$2.99 per pound and are considered to be affordable for most families.

 

US hog slaughter rates the past two weeks and so far this week have been running well above year-ago levels and the expectations from the most recent quarterly hogs and pigs data released in June. The USDA's estimate for slaughter the week ended July 27 was up 4.1 percent from a year ago, while last week's figure was up 5.2 percent. Early projections for this week's slaughter are around 2.0 million to 2.010 million head, which would be up between 5.9 percent and 6.5 percent from a year ago.

 

The quarterly hog data for June showed just a 1 percent increase from a year ago in the two middle categories of the weight breakdowns as of June 1. The increase in slaughter and pork production has allowed grocers to be cautious buyers and hold out for more attractive deals.

 

Meanwhile, speculation that China could be a bigger buyer of US pork for shipment this autumn due to disease outbreaks in its swine herd has caused volatility in the hog futures market in recent weeks.

 

October lean hog futures hit a new contract high on Friday of 77.70 cents per pound but have fallen sharply since then and closed Thursday at 71.20 cents, down 6.50 cents, or 8.4 percent from the peak. Weak cash prices over the past two weeks and huge slaughter rates have weighed on futures prices.

 

The average price of the 13 cuts of pork in the Dow Jones Newswires survey was US$2.35 per pound, compared with US$2.40 a week ago and US$2.21 a year ago.

  

Wholesale prices for boneless/skinless chicken breasts at midweek in the northeast US were up about 5 cents per pound from a week ago, while bone-in breasts and leg-quarters were generally flat with a week ago.

 

Market analysts and wholesalers said processors in recent weeks have been maintaining a 2 percent growth in egg sets from year-ago levels, but the increase is down about 1 percentage point from May and most of June. They said seasonally weaker prices expected for breast meat in September through November have caused the modest pullback in the number of broiler eggs placed into the incubators.

 

Meanwhile, leg-quarter prices have remained strong, compared with historic levels, on export sales to China and Russia. Leg-quarter prices are currently running nearly 12.5 cents per pound above a year ago for an increase of 32 percent, according to the USDA's weighted average price comparisons.

 

Higher wholesale prices for chicken cuts this year versus a year ago resulted in firmer retail prices as well. The average price for each of the four chicken items in the Dow Jones Newswires survey is up from the same week last year. The average for the category this week was up 14 percent from the year-ago figure.

 

The average price of the four cuts of chicken in the Dow Jones Newswires survey was US$1.62 a pound, compared with US$1.62 a week ago and US$1.42 last year.