United States-Retail meat prices.

UNITED STATES-RETAIL PRICES NOT CUT AS MUCH AS WHOLESALE.

Over the last few months, retail beef prices haven’t

kept pace with declines at the wholesale level, but that’s about to change,

economists and market analysts said.

Since peaking at $173.80 per hundredweight last July 10, the U.S. Department

of Agriculture’s reported carcass cutout price has declined unevenly. Friday it

was reported at $135.58.

Featured and regular retail beef prices at grocery stores, meanwhile, have

held relatively steady within a narrow range, and some meat traders and cattle

producers were beginning to wonder why grocers weren’t passing along the lower

prices to consumers.

Based on the apparent amount of beef that is booked for deferred delivery, it

looks as though grocers are preparing to push beef sometime after the Easter

holiday, analysts and economists said. While it’s impossible to know what

prices retailers plan to value the beef, the general feeling is that featured

prices will be attractive to shoppers.

Market analysts and agricultural economists all said they would have liked to

see more aggressively priced retail beef before now, but none were surprised

that U.S. shoppers hadn’t been treated to lower prices yet.

First of all, said Jim Robb, agricultural economist at the Livestock

Marketing Information Center, price moves at the retail level aren’t a

one-for-one relationship with wholesale prices. There are other costs involved,

like transportation, which can fluctuate independently of the wholesale beef

price, he said.

Unless grocers feel comfortable with their costs, including those add-on

costs, they will be less inclined to be aggressive about their retail pricing,

Robb said.

Kevin Bost, president of Procurement Strategies Inc., said there’s "always a

pretty good lag" between the time when wholesale meat prices go down and when

retail prices follow. He said the current lag is typical. It’s also typical for

analysts and traders to grow impatient, he said.

Retail prices are just now getting to a point where they might decline, Bost

said.

Robb said retailers need to be convinced that wholesale prices are down for

the long haul. Not only do they want to avoid being whipsawed by their pricing

schemes, but their advertising campaigns often must be planned a month or more

in advance to get printing and other parts of the program in place in time.

Retailers have been "very cautious," especially at the upper echelons of the

grocery chains, Robb said. Upper management probably has been more cautious

than lower-level management over the last few months because of the tough

economic times, he said. It’s been hard to tell what consumers would do or buy,

keeping management cautious about pricing.

Tom Elam, agricultural economist and private consultant with FarmEcon LLC.,

said the lag in response to lower wholesale prices sometimes comes because much

of the product a retail grocer buys is contracted well in advance of its actual

usage date. Sometimes, it’s months in advance, and the purchase price may not

reflect the current spot market, he said.

Adding to the uncertainty being felt by retail meat managers, Elam said, is

the reductions they see currently in meat production. Beef, pork and chicken

producers all are cutting back on herds and flocks.

Grocers also have been reluctant to lower beef prices, Robb and others said,

because they aren’t convinced the increased sales volume will bring in enough

money to offset what they’d lose by reducing the price. They would be giving up

profit margin, and it would take increased sales volumes to bring in as much

money per week.

Whatever the reasons for the time lag between wholesale and retail beef

prices, retailers now appear ready to try moving larger volumes of beef with

lower prices, the analysts and economists said. Product bookings for late April

delivery coincide with typical early May grilling features, they said.

Many don’t think the grilling ads will break the week after the Easter

holiday since the weeks before and after Easter typically are weak for moving

meat. The week after Easter also is the last week of the month, when disposable

income is lowest for most shoppers.

But once the first-of-the-month paychecks roll in, the weather warms and the

Easter holiday is behind them, consumers may be ready to fire up the grills -

and that usually favors beef, analysts said.