September 21, 2007

 

Lower US chicken, pork prices leverage beef

 

 

Declining wholesale chicken and pork prices are weighing on beef complex and may cut into the promotional space normally reserved for beef in the weeks ahead, according to market analysts and meat wholesalers.

 

Retailers this week included a wide mix of meat and poultry cuts across the full range of prices. The early-autumn temperatures are ideal for late-season backyard grilling or tailgating at sports events, and grocers are hoping to benefit by selling more of the premium-priced cuts and specialty sausages.

 

The beef features this week showed a general balance of items from among the ground products, steaks and roasts. This is normally seen during the transition periods in the fall and spring.

 

In the late summer to early fall, grocers tend to cut back on the number of premium steaks in the promotions, as backyard grilling activity slows from the summer peak. However, some families continue to grill later into the fall or to cook their steaks indoors, and grocers need the high-dollar sales, so the stores will continue to have some premium steaks in the ads.

 

More roasts are prepared during the cooler seasons and with schools in session. During this time, more of the meals are prepared at home, and roasts are popular for evening or weekend family gatherings.

 

Although beef may give up some of the advertising space to pork and chicken in the coming weeks, beef lovers need not fear, because there will still be plenty of product available. Buying the beef may cost shoppers a little more, though, with fewer cuts featured.

 

Steve Meyer and Len Steiner, analysts for the Daily Livestock Report for the Chicago Mercantile Exchange, said Wednesday (September 19) that retail beef prices for all grades in August were record high, according to the US Department of Agriculture's Economic Research Service. Choice-grade beef prices were up from July but below the record set in November of 2003.

 

The highs hit in choice beef prices in 2003 came shortly after cattle and wholesale beef prices had also hit record highs about a month earlier and following the finding of bovine spongiform encephalopathy, or mad-cow disease, in Canada in May of that year.

 

The USDA reported the choice beef carcass composite value on September 19 at US$145.49 per hundredweight, up US$3.55, or 2.5 percent, from a year ago. The largest increases were in the primal rib and chuck values. The rib cuts were up about US$4 per hundredweight to US$223.34, while the chuck was reported at US$112.89, up about US$9 from the same day a year ago.

 

Bruce Longo, analyst with Urner Barry's Yellow Sheet, said grocers have featured more of the cheaper chuck and round cuts throughout the summer due to tightened food budgets and concerns about the economy with home foreclosures on the increase. High fuel prices also are a factor. Shoppers have traded down to cheaper items to stretch their food budgets, he said. The additional features and sales have helped prop up wholesale chuck prices.

 

The average price of the 15 cuts of beef in the Dow Jones Newswires survey was US$3.87 a pound, compared with US$3.77 last week and US$3.64 last year.

 

On the other hand, record-large hog slaughters since the middle of the summer and seasonally expanded supplies in recent weeks are forcing wholesale pork prices lower. The USDA's pork carcass value, commonly known as the pork cutout, was at US$66.79, down nearly 5 percent from a year ago. Wholesale prices for fresh hams and butts have declined the most from this time a year ago.

 

Analysts, meat wholesalers and brokers said the distribution pipeline is struggling to keep up with the heavy volume of production entering the marketplace. Some deals have been made among packers and grocers for large volumes of pork to be featured into October and early November, but more sales need to be done, they said. Some buyers are holding off booking pork just yet as they wait for the targeted level of prices. Waiting, they said, can be of advantage as hog supplies are forecast to remain very large and packers may be forced to bring their quotes down further in order to generate more sales.

 

The average price of the 13 cuts of pork in the Dow Jones Newswires survey was US$2.33 per pound, compared with US$2.58 a week ago and US$2.18 a year ago.

 

For poultry, increased production since summer and seasonal pressure are weighing on wholesale chicken prices, meat and poultry analysts said. Boneless/skinless chicken breast prices have fallen 30 to 35 cents per pound in just the last two weeks, according to the USDA's quotes for loads delivered into the northeast. Bone-in breast prices are down 4 to 5 cents a pound during the same period.

 

Market analysts said demand at the wholesale level was good heading into the Labor Day holiday but has declined since then, resulting in lower prices to keep the product moving. Cooler temperatures also have helped the birds gain weight faster, which had added to the total tonnage of chicken available for sale.

 

However, wholesale prices are well above year-ago levels with boneless/skinless breasts currently up about 25 cents. Bone-in breasts and leg-quarters are both up about 15 cents.

 

Market analysts said demand for chicken at the wholesale level in both the retail and foodservice sectors currently is limited and prices are expected to be under additional pressure in the near term.

 

Chicken processors continue to put about 2 percent more eggs into the incubators, compared with a year ago, based on the USDA's latest eggs-set and chicks-placed report. Some analysts said if wholesale prices decline much further, processors may reduce the number of eggs set, but that wouldn't affect chicken production until at least mid-December.

 

The average price of the four cuts of chicken in the Dow Jones Newswires survey was US$1.58 a pound, compared with US$1.48 a week ago and US$1.47 last year.