October 5, 2007

 

US meat retailers may focus more on poultry and pork less on beef

 

 

Pork and poultry are beating beef in the quest for advertising space as greater production for the former leads to lower prices, analysts say.

 

Pork production is running record large and is projected to be up 4 percent to 5 percent from a year ago during the final quarter, according to the USDA.

 

Chicken output for the quarter is expected to be up 2 percent to 3 percent from a year ago. However, fourth quarter beef production is projected to be below the year-ago output by around 3 percent.

 

The larger supplies and cheaper prices for pork and chicken could cause grocers to feature less beef, but they will continue to include some beef cuts in the weekly feature mix because of the larger sales dollars generated by the category.

 

Also, shoppers want variety in protein choices, and beef features draw more customers into the stores, according to market analysts.

 

There are fewer bargains among beef cuts this month as cattle prices are high and supplies of slaughter-ready animals are expected to be down slightly from a year ago.

 

Although grocers will include some beef items in their weekly features prices may not be all that attractive as wholesale markets have been running slightly above a year ago, analysts said.

 

Grocers featured a fair number of premium steaks this week as well as roasts and some ground beef products.

 

Most supermarket chains have expanded the number and variety of roasts offered to shoppers since the Labour Day holiday. However, grocers will have fewer steak options available compared with the summer months.

 

Market analysts said grocers' meat buyers are reluctant to book much beef at this time because of a price disadvantage to the other proteins. They also said buyers will use pork and chicken as leverage when negotiating with their beef suppliers.

 

The average price of the 15 cuts of beef in the Dow Jones Newswires survey was US$3.74 a pound, compared with US$3.95 last week and US$3.75 last year.

 

Pork

 

Record large hog supplies are expected to keep wholesale prices low for most cuts throughout the month and likely the entire fourth quarter, analysts and meat brokers said.

 

Slaughter rates in the latest three weeks have averaged about 4.4 percent above a year ago. This week's slaughter is projected to be at or above 2.3 million head and easily a new record. The current record is 2.265 million set in December of 1998.

 

Analysts said hog supplies have expanded more and sooner this fall than had been expected, which has contributed to the price pressure seen in the wholesale markets. The USDA's pork carcass composite value on Monday was the lowest since April 18, 2006.

 

Expectations for pork supplies to remain very large throughout the month and quarter could result in some bargains for consumers. Grocers may feature whole boneless loins, butt roasts and smoked hams at discounted prices to move larger volumes.

 

Analysts said ad space devoted to pork would likely be expanded to include more items.

 

The average price of the 13 cuts of pork in the Dow Jones Newswires survey was US$2.14 per pound, compared with US$2.35 a week ago and US$2.26 a year ago.

 

POULTRY

 

Wholesale prices for boneless/skinless as well as bone-in chicken breasts have been declining since the Labour Day holiday. Prices for the boneless/skinless product have fallen about 40 cents per pound, or about 22 percent, in the past four weeks. Bone-in breast prices are down about 25 cents from four weeks ago.

 

Seasonal factors and larger production are weighing on prices, meat and poultry analysts say. Broiler processors may trim production a bit if prices fall much further but through last week they have continued to place about 2 percent more eggs into the incubators, compared with a year ago.

 

Eric Scholer, market analyst with Express Markets Analytics in Ft. Wayne, Ind., predicts that boneless/skinless breast prices could slide another 10 to 15 cents but more gradually than what has occurred during the past four weeks. Better buying interest from retailers and the lower prices are driving better feature activity with more volume being moved.

 

Leg-quarter prices have softened only a few cents per pound during the past four weeks due to continued strong sales to China and Russia, Scholer said. The USDA quoted leg-quarters Thursday at 43 to 44 cents on a load basis delivered into the northeast US, compared with 48 to 49 cents four weeks ago.

 

He said leg-quarter prices may decline to around 39 cents per pound later this fall when the Russian ports are closed for the winter. However, export demand is expected to remain good enough that the product will go into storage for shipment next spring.

The average price of the four cuts of chicken in the Dow Jones Newswires survey was US$1.69 a pound, compared with US$1.62 a week ago and US$1.54 last year.