Meat + Poultry - April 2009 - 26

CUTTING BACK

Beef's predicament
Boxed-beef prices in early March
were 10 percent below last year's levels. Pork cutout values were 5.5 percent lower than last year. But pork
and chicken were still much cheaper
than beef, which is why consumers
continue to trade down in their purchases. This trend began last year
and has accelerated. The wholesale
beef market for months has reﬂected
the shift. The price differential between tenderloins and ribs relative to
end meats (chucks and rounds) and
grinding beef has been at historically
narrow levels. Retailers say customers are even trading down from the
highest-priced (leanest) ground beef
to the cheapest or fattiest.
"The Power of Meat," an annual
joint study by the American Meat Institute and the Food Marketing Institute, conﬁ rms the trend. The latest
study, which details the ﬁndings of a
national online poll of 1,059 consumers conducted last November, says the
recession is being felt throughout the
grocery store, especially in the meat department. Economic woes are affecting
where people shop for meat, as well
as the kind of cut, brand and quantity
purchased, it says.
While shoppers are eating out less
and cooking at home more, they are
also trading down, substituting and
eliminating, resulting in overall food
spending remaining roughly the same
26

MEAT&POULTRY

April 2009

as a year ago at $91 per week, says
the report. But while grocery expenses may be relatively unchanged, the
way shoppers are spending most certainly is not. The study found at least
half of consumers are using coupons
whenever possible, buying only what
they need and switching from national
brands to store brands.

Photo courtesy of Cargill Meat Solutions

past year. They are saving more and
spending less, hence, the trading down
in meat purchases.
Restaurants nationally are also suffering and this is hurting beef demand,
particularly for middle meats. OSI Restaurant Partners, which operates Outback Steakhouse and Fleming's Prime
Steakhouse chains, reported sales for
its 2008 fourth quarter were down
nearly 10 percent on the year before.
Outback's sales were down 9.5 percent
and Fleming's were down 19.6 percent.
Outback has now rolled out 15 meals
under $15 to lure back customers. Most
of these items aren't beef.

declined about 2 percent in 2008 from
2007. But the decline accelerated in
the fourth quarter from the third and
has continued to slide in the current
quarter. Pork demand declined 3 percent in 2008 and has also fallen more
drastically this year. Both will decline
more in 2009 than in 2008. A key factor
is the amount of total meat and poultry that will be consumed. USDA's latest forecast is for beef disappearance
to be up 28 million lbs. in 2009 from
2008. Pork disappearance will be up
519 million lbs. while broiler and turkey disappearance will be down 118
million lbs. Beef will face even more
competition from pork.

A more challenging
environment

Boxed-beef prices in
early March were
10 percent below last
year's levels. Pork cutout
values were 5.5 percent
lower than last year.
When it comes to the meat case, 51
percent of the respondents said they
have changed their purchasing habits. Popular ways to save money in
the meat department include greater
preparation before going to the store
and a longer selection process when
in the store - 71 percent said they
read the grocery ﬂyers looking for
meat and poultry deals more often
and more carefully than a year ago.
Sixty-nine percent stock up on meat
when it is on sale, and 67 percent
purchase less-expensive cuts either
frequently or every time they shop.
Others cook more casseroles or pasta
dishes to make the quantity go further
or buy and cook meat and poultry less
often, the report indicates.
Beef and pork demand are suffering as a result. Overall beef demand

www.MEATPOULTRY.com

Meat and poultry processors thus face
a market environment in 2009 that is
more challenging than forecast only
three months ago. They will somehow
have to sell their products at a price that
attracts consumption yet allows them to
make a proﬁt. While 2008 was a proﬁtable year for most beef and pork processors, it was a deeply negative year
for chicken processors. Beef margins
during the ﬁrst two months of 2009
were positive but then turned negative.
Pork margins were red for seven out of
nine weeks. In the week ended March
14, fed beef and pork processors lost a
combined $46 million. Conditions will
remain challenging throughout 2009 so
margin management will be more vital
than ever, say observers.
Beef packers also face considerable
erosion in by-product values. These
were 45 percent lower the second week
of March than for the same week last
year. Most of the decline has come in
hide values. A steer butt branded hide
that week sold for only $29 versus a
high of $64 in the summer of 2008, reﬂecting a global glut in hides and weak
leather demand. The value averaged
only $5.88 per cwt. the ﬁrst week of
March, which meant $61 per head less
than a year earlier. By-product values
are how packers cover their variable
costs. That's why beef margins went

http://www.MEATPOULTRY.com

Meat + Poultry - April 2009

Table of Contents for the Digital Edition of Meat + Poultry - April 2009