UNITED STATES-RETAIL TRADE SLOWS DOWN.
February is typically a slow month for meat sales,
particularly the more expensive cuts, and the weak economy has caused many
households to further tighten spending.
Grocers attempt to offer a mix of meat and poultry products that will pull
additional shoppers into stores and generate more total sales dollars and
margin.
For some grocers, February is a slow month to endure while looking forward to
an increase in store traffic and sales in March, a meat and poultry distributor
said. The stores do the best they can to attract customers with Valentine’s
specials, candy and flowers, but that is mainly a dine-out holiday, he said.
Retail meat buyers and processors are doing some business for deliveries in
late February and March, analysts said.
Beef
Regular hamburger and other ground beef products were widely found in the
printed advertisements this week as low-price features for the category.
Grinding the chuck or round is also a way for the stores to merchandize those
cuts in order to keep inventories in balance during periods when sales of
roasts have not kept up with expectations or production. Demand for the various
cuts changes seasonally so grocers alter their merchandising methods to
maximize their returns but also to keep from developing a backlog of any
particular cut of meat.
Kevin Bost, president of Procurement Strategies Inc., said February is a poor
sales period for retailers. "March, I suspect, will be quite a bit better," he
said. Beef processors are asking higher prices for beef middle meats to be
delivered in March but the premiums are not as high as they were, he said.
There are more attractive deals available now for buyers than there were two
weeks ago.
Wholesale beef prices have been sliding during the past two and a half weeks.
The choice grade cutout value as reported by the U.S. Department of Agriculture
has declined for 11 consecutive days and was weaker again in the midday
Thursday report. Select beef prices have fallen in 10 of the last 11 days and
were also weaker in the midday quote. Based on the USDA’s midday prices, choice
beef values have fallen $13.33 per hundredweight, or 8.7% since Jan. 20. In the
same period, select beef was down $9.70, or 6.7%.
The start-up of grilling activity in the southern areas of the country in
March could provide an initial boost to demand and wholesale prices, analysts
said. As the warmer weather moves north, sales of grilling cuts will gradually
improve.
The average price of the 15 cuts of beef in the Dow Jones Newswires survey
this week was $3.73 a pound, compared with $3.85 a week ago and $3.71 a year
earlier.
Pork
Grocers featured multiple pork cuts this week including chops, butt steaks or
roasts, and spare-ribs. Wholesale pork prices so far in February are running
about 6% below a year ago. Some packers are offering pork for delivery
throughout the balance of this month at or near current prices, according to
market analysts and brokers.
Jim Kenny, analyst with Urner Barry’s Yellow Sheet, said pork is available
due to a combination of slowed export sales, especially to countries other than
Japan that were large buyers in 2008. Also, production is still quite large,
even though it is down a bit from a year ago.
Kenny said loin prices have been lagging behind, compared with other cuts.
Sales of boneless loins slowed first, and prices declined. Some packers then
reduced their boning operations and began to offer more bone-in loins for sale,
now there are ample supplies of those as well, he said.
Both Bost and Kenny considered boneless loins as the best bargain or
opportunity for grocers. They also predicted prices will move up in March on
tightened hog supplies and expectations of better demand.
Bost predicts that weekly hog slaughters during February will be near a year
ago but dip by about 3% in March, compared with 2008. He expects a further
decline in April to about 6% below a year ago.
The 13 cuts of pork in the survey averaged $2.23 a pound, versus $2.32 last
week and $2.24 a year ago.
Poultry
Wholesale prices for chicken have moved gradually higher since late 2008 on
reduced supplies as processors have continued to trim production since last
summer.
High feed costs and tight to negative margins initiated significant
reductions in egg sets late in the summer and early autumn. The U.S. Department
of Agriculture reported egg sets in the 19 largest producing states for last
week at down 9% from a year ago. The eggs set estimate for last week was just
under 199 million, the lowest since the week-ended Nov. 8.
Eric Scholer, analyst with EMI Analytics Inc., said the cutbacks in
production are supporting the stronger market prices for chicken. The soft
economy, however, is partially offsetting the cutbacks so prices have not moved
up as much as some people in the industry had hoped or expected.
The rebound in prices and declines in feed costs are improving the
profitability outlook for processors. Prices may soften over the next week or
two, however, on slowed sales even with production reduced, Scholer said.
Prices are expected to begin a slow rebound by late February or early March on
improved domestic demand and more activity expected in the export markets.
Because of cutbacks that are already in place in poultry and livestock
production, there should be less total protein available going forward. The
amount available in domestic supplies will depend on how much is exported,
Scholer said.