August 24, 2009

All may not be as it seems in the meat markets.

Wholesale market demand for beef is said to be picking up for September, but market analysts worry the move will be cut off by low-priced pork, and spot-market beef sales for the Labour Day holiday weekend may be aimed more at first-of-the-month buying than at any holiday demand.

 

The Labour Day holiday traditionally is thought of as the last grilling weekend of summer and a good market for low-cost grilling items. But Bruce Longo, market analyst for Urner Barry's Yellow Sheet, said sales records prove the holiday only serves as a benchmark for the end of the summer grilling season and not as a holiday that sells any meat.

 

Still, grocers hungry for an advertising peg will write advertisements based on the grilling aspects of the holiday, Longo said. The market transitions into a fall market quickly after Labour Day, and the next holiday on which to hang a meat ad doesn't come for another 2 1/2 months.

 

The transition into fall could be a good thing for retail grocers, market analysts said. It could allow them to more easily guess the cuts of meat that could be more desirable to consumers.

 

Traditionally, summer meat demand tends toward the grilling cuts, and grocers have tried hard to put these items in front of shoppers at respectable prices.

 

The problem has been that shoppers are deeply affected by the recession, and many have had the additional problem of local weather patterns that aren't conducive to backyard grilling. This has made it difficult for grocers to guess which item to feature through the summer, market analysts said.

 

In the fall, however, consumer demand turns more toward roasts. These products are cheaper because the beef or pork carcass produces more of these products than it does the steaks or chops.

 

Having seasonal consumer demand turn toward cuts they can better afford could give grocers a leg up on featuring the types of products shoppers will buy rather than just wish for, the analysts said. The change also could wind up selling more beef, even if it isn't the more expensive steaks.

 

Packers have seen enough interest in September beef bookings to make them think beef will "have a presence" in the weekly newspaper supplements in September, Longo said. This is true at least through the first half of the month; he's seeing some weaker prices for bookings in the last half of the month.

 

There's no reason beef can't be featured in September, Longo said. Prices are below a year ago.

 

For instance, bottom round flats (bottom round roasts) averaged about US$1.47 a pound for the first weeks of August. August's average a year ago was US$1.89, and August's five-year average is US$1.63, Longo said.

 

"Deals can be made," Longo said.

 

The average price of the 15 cuts of beef in the Dow Jones Newswires survey was US$3.79 a pound, compared with US$3.65 a week ago and US$4.06 a year ago.

 

Even with the transitioning pattern in seasonal beef favourites to less-expensive cuts, pork is unlikely to fade into the background, market analysts and meat traders said. It's too cheap for meat buyers to ignore. They can offer good-looking specials to consumers and still make a profit.

 

Pork may relinquish some front-page space to beef in the early weeks of September, but market analysts do not see this happening for long, especially as October approaches. October long has been thought of as "pork month." Industry groups at one time even subsidized pork advertising during the month to enhance sales.

 

Exactly what retailers will feature in coming weeks is difficult to say, said Jim Kenney, market analyst with the Yellow Sheet. Conversations with meat buyers reveal plans to feature pork, but nailing down which cuts comes down to which products can be purchased in the spot market for the lowest price, he said.

 

This is the pattern meat buyers have been following for months, and with the abundance of pork flooding the wholesale market currently, there is no reason for them to change, Kenney said.

 

The average price of the 13 cuts of pork in the Dow Jones Newswires survey was US$2.08 per pound, compared with US$2.09 a week ago and US$2.29 a year ago.

 

In the bid to keep affordable meat products in front of shoppers, retail grocers continue to offer plenty of chicken items. The Dow Jones Newswires survey showed boneless/skinless breasts being advertised in nearly every surveyed city.

 

Advertised prices, however, were not particularly attractive, although some were cheaper than others.

 

Price support is a function of lower production over the last year, said Eric Scholer, market analyst for EMI Analytics. Production for the first six months of this year is down 5.8% from a year ago.

 

Poultry production in the second half of 2009 likely will not diverge that much from year-earlier figures, Scholer said, because producers began cutting production a little more than a year ago.

 

Poultry sales at retail currently aren't as good as might be expected because it still has to compete with low-priced pork products, Scholer said. This likely won't change any time soon.

 

The average price of the four cuts of chicken in the Dow Jones Newswires survey was US$1.52 per pound, compared with US$1.41 a week ago and US$1.62 a year ago.