October 30, 2009

Retail grocers appear to be getting ready to go traditional with their meat advertising, although specific plans likely will be adjusted to accommodate the recession.

 

The US Gross Domestic Product report Thursday showed an unexpected jump, indicating that some economists may be right when they say the recession is over, but retailers are counting on a continued gloomy outlook by shoppers. Consumers aren't likely to change their most recent cautious food-buying practices soon, market analysts said.

 

With that in mind, retail grocers appeared to be ready to stick with the traditional in terms of advertising plans and have a little less product on hand for the holidays than they have had in the last few years. All advertising will be aimed at moving the largest volume of product to generate the most cash flow while still bowing to the demands of the holidays.

 

Retail grocery advertising next week could centre on beef products for the first week of the month and then migrate into more of a red meat scheme until the Thanksgiving advertisements break late in the month. Many stores already are advertising a free holiday turkey for a total amount in pre-holiday shopping, so the transition to holiday meats has begun.

 

Holiday beef bookings this week continued to sizzle, but this left some cuts on the back burner. It took more work, and lower wholesale prices, to sell these products, keeping a lid on the whole carcass cutout levels.

 

Packers are fairly well-sold for some items, but the other products were a concern, said Bruce Longo, market analyst for Urner Barry's Yellow Sheet. Holiday beef items often are more of a food-service and banquet item than they are a family meal product. Some families go for a rib roast for the Thanksgiving meal, and more families put them out for the Christmas meal, but turkeys and hams dominate home menus.

 

The rest of the carcass needs to move through consumer or export hands or it will be a burden to the wholesale beef market, Longo said. He and other market analysts said they, the packers and cattle traders would be watching meat markets carefully for signs to gauge how well beef is moving through the system.

 

Beef demand currently remains below year-ago levels, said market consultant Kevin Bost in his weekly newsletter Meat Markets Under a Microscope. Demand has been below year-ago levels for the past 26 weeks, but the recent buying indicates wholesale beef demand has turned sideways.

 

Bost said he thought general beef demand was flattening with the economy and could be expected to rise gradually in coming weeks as the economy digs itself out of the great recession.

 

The beef market does have some issues, Longo said. It is just exiting "pork month" and is headed into "turkey month." Adding to the issue is the recession and the budget conscious consumer, he said.

 

The average price of the 15 cuts of beef in the Dow Jones Newswires survey was US$3.82 a pound, compared with US$3.63 a week ago and US$3.92 a year ago.

 

Pork month is over, and there doesn't seem to be a lot of demand to carry the market into November, said Andrew Knox, market analyst at the Yellow Sheet. Plus, there is a lot of production, he said.

 

Hog slaughter last week was 2.328 million head, which produced 470 million pounds of pork, according to the US Department of Agriculture.

 

Bost said, however, that technical studies indicate wholesale prices for bellies and ribs may have set seasonal lows and could grind higher into March. This could mean slowly rising prices at retail or a shift in grocer demand away from pork and toward other meats, at least for some weeks.

 

In the short run, though, loins and butts remain under pressure Knox said.

 

Holiday hams are booked by now, so the domestic market now is a wait-and-see game to judge consumer demand for the product.

 

There are rumors of some export business being done for hams, market analysts said.

 

Troy Vetterkind, director of livestock analysis and trading for Vetterkind Cattle Brokerage, said a cheap US dollar was fueling foreign interest in the hams, and others said a turn higher in the dollar may have moved some buyers off the sidelines.

 

Pork will be widely available in weekly newspaper grocery advertisements, over the next couple of months, but other than the holiday hams, it likely won't a feature item, the analysts said. The seasonalities are working against it.

 

The average price of the 13 cuts of pork in the Dow Jones Newswires survey was $2.08 per pound, compared with US$2.17 a week ago and $2.29 a year ago.

 

Advertised chicken prices from late October through November and December were expected to be relatively inexpensive for the consumer, market analysts said. Retail grocers, however, will be somewhat biased toward the red meats as they attempt to play down poultry products that might compete with turkey.

 

Chicken may be featured around the middle of November or the middle of December, but typically it is co-featured with red meat products. Chicken may muscle its way to the front pages with low wholesale prices, but the push to move product likely will be tepid.

 

Countering the shift to more emphasis on red meats outside of the holiday turkeys is reduced production, said Mike O' Shaughnessy, market analyst at the Yellow Sheet. Producers report plans to trim production "to minimize a collapse of the price structure."

 

The holiday season is hard on sales of chicken, O' Shaughnessy said, because of the demand for counter space. The holiday turkeys and hams take up space that would otherwise be used for other meats, including chicken, and cooler space also becomes a precious commodity to retail grocers.

 

The average price of the four cuts of chicken in the Dow Jones Newswires survey was US$1.42 per pound, compared with US$1.53 a week ago and US$1.60 a year ago.