Retail beef features have been one of the key drivers of beef sales in the grocery store. This consumer, like most of you, eagerly scans supermarket flyers after they arrive each Tuesday in my letter box. I don’t always make a buying decision based on what’s being featured, but I am always interested in the level of feature activity to try and forecast what sales might be.
That is especially relevant whenever the industry comes up to a major holiday like Memorial Day and now the Independence Day holiday. It was thus disturbing to see the paucity of feature activity leading up to Memorial Day and throughout June. That paucity was especially alarming given that wholesale boxed beef prices since the start of May have been well below year-earlier levels.
The weekly comprehensive cutout (cuts, grinds and trim) the week before last averaged $262.38/cwt. This was down 14.2 percent from the same week last year. The week before that, it was down 17.7 percent.
Yet retail beef features remain conspicuous for their lack of aggressive prices or their almost total absence from some flyers. As June began, the question on everyone’s lips in the beef complex was whether June would see bigger retail and food service beef sales than May. But retailers featured beef less aggressively than hoped for over the Memorial Day holiday and week, and that trend continued throughout June.
May retail beef prices showed that retailers kept their prices high. USDA’s All Fresh beef price averaged $7.37/pound, up 9.5 percent from May last year. Choice beef prices averaged $7.68/lb., up 10.3 percent. Analysts say retailers are continuing to maximize their beef margins and are comfortable with the volume they are selling. Even if they sell less beef, higher prices make them more money. Retailers also say consumers are being increasingly impacted by food inflation and are buying more pork and chicken.
Even ground beef features are not what they used to be. Sure, it has been many years since you could buy $1.99/lb. ground beef in any form. The features I now see are usually at least $4/lb. and are even higher for gourmet beef patties. The number of retail ground beef features in May was down 2 percent from last year and was 13 percent below the five-year average for May. Feature prices for ground beef were record high at 13 percent above last year and 21 percent above the five-year average.
In northern California where I live, Safeway three weeks ago had only one beef feature in its flyer, a Choice boneless beef chuck steak or roast at $3.49/lb., its member price.
Packers are now trying to convince retailers they should promote chuck and round steaks more as being a better value for their customers. Another move over the past few weeks is that packers are having to offer large discounts on middle meat items to secure forward orders. Seafood two weeks ago claimed almost 33 percent of total retail protein features, while beef followed with 30.2 percent, according to Urner Barry.
I scanned the flyers again last Tuesday and was relieved to see that beef features were more prominent than in June. Most chains had tri-tips around $4/lb., reflecting the cut’s popularity on the West Coast. There were even some middle meat items that were reasonably priced, which went against the adage that the July Fourth holiday is primarily a hot dog, burger and chicken leg event.
I certainly hope for the market’s sake that consumers grilled a lot of beef over the holiday and that retailers feature it much more aggressively in July than they did in June.
My other great hope is that at least some of the areas impacted by drought start getting some much-needed rains. It is dry as a proverbial bone here in northern California, but we don’t expect a drop of rain until September or October. Drought and pasture conditions have improved in the last month or two, but the situation is still very poor compared to last year and previous years—so said USDA’s Economic Research Service (ERS) in its latest monthly Livestock, Dairy and Poultry Outlook report. ERS noted that national hay stocks were down 18 percent on May 1 from the previous year.
Higher operating costs and continued poor pasture conditions are likely weighing heavily on cow-calf producers, said ERS. They are likely causing them to cull deeper into their herds to offset or reduce costs. Based on the pace of beef cow slaughter to date, ERS raised its anticipated slaughter of beef cows in the second and third quarters. That should leave fewer beef cows available for slaughter in the fourth quarter, it said. That also means less ground beef to feature. —
(Steve Kay is editor/publisher ofCattle Buyers Weekly,an industry newsletter published at P.O. Box 2533, Petaluma, CA 94953; 707-765-1725. Kay’s Korner appears exclusively in WLJ.)
