U.S. economy spells trouble for beef, pork demand
By Bruce Blythe, Drovers Business Editor
| Wednesday, June 09, 2010
If the consumer is king, the lurching
Rallying cattle prices restored beef producers’ profits this spring following at least two years of losses. Whether those high prices continue hinges largely on demand, economists say, and recent signs haven’t been very encouraging.
Job growth last month was smaller than expected, and
“The consistent story so far has been weaker than expected demand” for beef, said Glynn Tonsor, an assistant professor of livestock and meat marketing at
Last month, the USDA, in its monthly Supply and Demand report, cut its projection for
The revised figure is down 3.1 percent from 2009 and would be the lowest per-capita consumption since 1952, according to USDA data. Additionally, the USDA cut its pork consumption forecast to a 32-year low.
The USDA is scheduled to release its next Supply and Demand report tomorrow at 7:30 a.m. Central time.
Among the major meats, beef demand is the most sensitive to employment and household income trends, Tonsor said.
“Current weakness in beef demand is largely tied to reduced consumer incomes,” Tonsor said. With many Americans still out of work, “you have less income available for beef purchases.”
Recent sales figures underscore the USDA’s outlook.
During the four weeks ending April 25, U.S. retail beef sales totaled 317.5 million pounds, down 2.3 percent from the same period in 2009, according to FreshLook Marketing Group, a Hoffman Estates, Ill.-based research firm. In dollar terms, beef sales rose 0.1 percent, to $1.18 billion.
By comparison, chicken sales during the period rose 2 percent by volume and 1.3 percent in dollar terms.
Wholesale beef prices climbed near two-year highs in May as the peak-demand summer grilling season neared. Now, some observers wonder if the beef industry is set up for a summer let-down.
“Everyone was looking at Memorial Day beef sales to gauge beef sales for the rest of the summer,” livestock analysts Steve Meyer and Len Steiner said in a report today.
While pre-Memorial Day beef sales were “good, and as expected,” the analysts said, “what has been disappointing is the follow up business. It appears to us that once the Memorial Day features were done, retailers shifted gears to less expensive meat items.”
“The recession may be over on paper but a lot of people continue to struggle with debt and lower property values,” Meyer and Steiner said. “On the demand side, things do not appear to be quite as good as some had hoped for.”
Pork, though typically cheaper than beef, also faces eroding demand.
During the four weeks ending April 25, fresh pork sales fell 11 percent from the same period a year earlier, to 233.5 million pounds, according to FreshLook Marketing. Dollar sales fell 7 percent, to $517.8 million.
In May, the USDA reduced 2010
While livestock futures have tumbled from multiyear highs reached in April and May, further price declines may be limited because animal inventories have shrunk. The number of cattle on feed at the beginning of May fell to a six-year low.
Near today’s close, June live cattle in
June lean hogs fell 0.125 cent to 77.5 cents a pound, after yesterday falling to the lowest price since mid-February. June hogs are down almost 12 percent from a contract high of 87.8 cents on April 22.
