October 19, 2009

Retail meat buyers in the US are in the market booking holiday needs and turning the wholesale carcass price higher. Pork and chicken demand, however, continues at a more-or-less steady pace.

 

Until November, it appears retail features will continue offering more pork and chicken than beef since both are cheap, product has been booked at profitable levels, and consumers aren't particularly focused on beef.

 

Starting with the first week of November, that balance could shift toward lower-priced beef items as grocers seek to whet consumer appetites for the Thanksgiving turkey and/or ham.

  

"The [beef] market appears to have reached a sensitive level, one that will accommodate the kind of feature prices that retailers are looking for; and one that steak cutters can afford to lock in; and one that restaurants can live with for a while," said Kevin Bost in his weekly newsletter Meat Markets Under a Microscope.

 

Beef buyers, however, will be cautious, said Bruce Longo, market analyst for Urner Barry's Yellow Sheet. There likely will be more buying to support wholesale prices, but it will not be a runaway market, he said.

 

The timing is right for retailers to begin booking their holiday beef needs, Longo said. He expected advance bookings for the Christmas holiday to be done by Thanksgiving.

 

Market analysts continue to debate the direction of beef demand in coming weeks and months. Some analysts say the recession and the large number of unemployed likely will keep a lid on consumer demand, especially through the restaurants, for a while.

 

Others, like Bost, say the downtrend in weekly jobless claims is one piece of evidence that the recession is over, and if the recession is over and the monetary base continues to expand, then economic activity will grow. This in turn should fuel an increase in restaurant traffic and meat demand.

 

As retail grocers book holiday rib roasts, they aren't forgetting all the time in between these year-end events. Longo said end cuts are popular with retail buyers, indicating they plan to stick with roasts in their weekly advertisements in off-holiday weeks.

 

The average price of the 15 cuts of beef in the Dow Jones Newswires survey was US$3.73 a pound, compared with US$3.57 a week ago and $4.01 a year ago.

 

Retail pork buyers are watching the wholesale product market carefully because prices may be turning higher. Market advisors like Bost are advising customers to keep an eye on the market, thinking supplies may not expand much more and that prices could be supported in the future.

 

"Hog prices have fully discounted the seasonal bulge in pork production, [and] pork supplies will not become measurably larger than they have already," Bost said in his newsletter.

 

Wholesale ham prices rose this week as processors sought to fill holiday ham orders, said Jim Kenney, market analyst for the Yellow Sheet. Wholesale prices had reached levels that should offer them a good profit on the hams they deliver to the stores.

 

There was no word from retailers, however, about how aggressively they might feature hams for the holidays, Kenney said. They only thing that seems evident is that there should be ample supplies.

 

Now that the holiday ham needs are met, grocers are focusing on fresh meat needs for the rest of October, Kenney said. November buying could be off a bit because November typically isn't a good month for pork sales, he said.

 

The average price of the 13 cuts of pork in the Dow Jones Newswires survey was US$2.15 per pound, compared with US$2.05 a week ago and US$2.38 a year ago.

  

Apart from the wings, chicken is "pretty cheap," said Sue Trudell, vice president of EMI Analytics.

 

As a result, consumers can expect scattered features on various configurations of the legs, Trudell said. She expected fewer features of boneless/skinless breasts, however, since the profit potential isn't as great.

 

That being said, seasonal price bottoms for whole birds and breasts are close, Trudell said. The majority of wholesale price cuts are done.

 

Wing prices are at a record high, however, at around US$1.50 a pound versus the last high in February of US$1.48, Trudell said. It looks like the market will miss its normal dip in October for the same reason it missed its summer slide.

 

Chicken slaughter this year is down about 10 million birds a week through September, and demand for wings isn't down by 20 million a week, Trudell said.

 

When the fall buying for the football season kicked off, buyers found wing prices remained as strong as they were in the spring, and sports bar receipts have proven to be somewhat recession proof, Trudell said.

 

As a result, some bars and foodservice establishments are experimenting with other products like breast strips, barbeque ribs or even drumsticks. Retail grocery buyers also are finding their orders shorted because there aren't enough wings to go around.

 

The average price of the four cuts of chicken in the Dow Jones Newswires survey was US$1.42 per pound, compared with US$1.31 a week ago and US$1.49 a year ago.