October 5, 2009

With no holiday on which to hang a retail grocery meat-advertising campaign, grocers appear to be going with the traditional and the cheap for October.

 

That means a bias toward featuring pork and chicken for the month. Wholesale beef prices are getting cheap enough in the spot market to attract attention, but analysts said retailers have already planned for the other meats.

 

Grocery buyers have a comfortable percentage of their expected holiday rib-roast needs contracted with packers, said Bruce Longo, market analyst for Urner Barry's Yellow Sheet, but they are delaying their spot-market fill-in purchases for as long as possible.

 

A chart of wholesale prices supplied by Yellow Sheet for rib roasts shows a general trend for prices to begin rising early in September as buying interest increases. In years of greater economic uncertainty, however, the beginning of the seasonal price increases gets delayed.

 

Last year, for instance, rib-roast prices declined sharply until early October when they shot higher into early November to get back close to the five-year average, the Yellow Sheet figures showed.

 

Longo said he expected the pattern for rib-roast prices this year to mirror last year's pattern.

 

In the meantime, beef isn't expected to command a major portion of weekly front-page advertising space for October, analysts said. Wholesale prices are low enough now to attract spot-market buying interest, but they weren't there in mid-September, and grocers went with other meats for the largest percentage of their retail features, they said.

 

Retailers also are losing heart for beef currently, Longo said. They need a week of active consumer purchasing to renew their confidence, he said.

 

As evidence of the lowered level of retailer interest in beef, Kevin Bost, president of Procurement Strategies Inc., said in his weekly newsletter, "Meat markets Under a Microscope," that last week's forward beef sales were one of the lowest-volume weeks of the year.

 

In a broader sense, wholesale beef prices and demand are very low, Bost said. He sees the demand trend moving sideways to higher by the end of the year.

 

The average price of the 15 cuts of beef in the Dow Jones Newswires survey was US$3.72 a pound, compared with US$3.65 a week ago and US$4.05 a year ago.

 

October once was known as "pork month" because the National Pork Board, the directing office of an industry-financed product-promotion program, used to subsidize advertising during the month. The habit sort of caught on, and pork has an unofficial bias in retail grocery promotions during the month, market analysts said.

 

Going forward, hams, butts and spareribs have the best chance of increasing in wholesale value, Bost said.

 

Hams appear to be positioned for a strong push for the holidays since prices have been low and stable all year, Bost said. He estimated stocks to be down about 20 percent from a year ago, which helps to support prices.

 

Butt prices have only been this low in two of the last 30 years, Bost said. Spareribs also are cheap; the last time they were this low was at the beginning of October 1976. Such wholesale bargains are hard to ignore.

 

The average price of the 13 cuts of pork in the Dow Jones Newswires survey was US$1.94 per pound, compared with US$2.18 a week ago and US$2.40 a year ago.

 

Chicken also looks as if it will claim front-page space in October newspaper supplements because it is cheap, market analysts said.

 

Supplies are up currently in spite of lowered production this year as food-service demand remains slow, said Eric Scholer, market analyst for EMI Analytics Inc. Demand for grilling items also has slowed seasonally, he said.

 

Grocery demand may be shifting over to the red meats as prices decline in this section of the meat case, Scholer said.

 

That has led to wholesale prices for most products that are low enough to offer shoppers attractive retail and featured prices, Scholer said. Export demand for leg quarters is beginning to pick up seasonally, but stocks remain ample, and consumers could see various versions of these cuts in their weekly newspaper supplements.

 

Chicken wings are the one product that defies the trend of all the others, Scholer said. Wings are so much in demand that some producers are rationing them to customers or they are packaging them with breasts or leg quarters to keep these products moving.

 

The average price of the four cuts of chicken in the Dow Jones Newswires survey was US$1.33 per pound, compared with US$1.52 a week ago and US$1.51 a year ago.