United States-Meat sales slowdown.

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.