Beef, Pork Facing Supermarket Battle From Cheaper Chicken

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Beef and pork producers face an intensifying battle at the supermarket meat case from cheaper, more plentiful chicken, analysts say.

U.S. grocery stores probably will step up discounts and specials on fresh chicken in coming weeks after wholesale beef and pork prices soared near two-year highs, BB&T Capital Markets analyst Heather Jones said. Wholesale chicken prices have also risen, though not nearly as much as beef and pork.

As a result, price “spreads” – or the difference between what retailers pay for wholesale meat and what they charge in their stores – suggest grocer discounts will favor chicken breasts and legs more than steaks and chops.

“We believe this is bullish for chicken retail feature activity,” Jones said in a report today.

Increased chicken competition could be troubling for beef and pork demand, which suffered in recent years from the recession and a slump in exports. Retailers have been reluctant to raise prices with the economy’s recovery still fragile. Some major chains, such as Wal-Mart Stores Inc., recently launched advertising campaigns touting lower prices for most goods.

For beef and pork, retail prices have yet to catch up with the run-up at the wholesale level.

Retail pork prices on average were about $1.61 a pound above wholesale values during March, compared with a spread of $1.83 a year earlier, Jones said, citing U.S. Department of Agriculture data. In beef, retail prices were about $1.91 above wholesale, compared with $2.21 a year earlier.

Chicken prices at retail during March were about 92.8 cents above wholesale, compared with 95.4 cents a year earlier.

Rising beef and pork prices reflect tighter supplies of slaughter-ready animals, after livestock producers cut herds in recent years.

On wholesale markets, choice beef cutout values yesterday averaged $1.7027 a pound, the highest since prices approached $1.74 in July 2008, according to USDA data. Pork carcass values averaged 89.83 cents a pound yesterday, up 33 percent this year.

Beef and pork prices are “still robust,” Jones wrote. Wholesale pork has been “exploding” higher, she said.

Many grocers have already been promoting discounted chicken, as well as specials on beef and pork cuts.

During the past week, Jewel-Osco promoted chicken drumsticks and leg quarters for 99 cents a pound and fresh boneless chicken breasts for $1.99 a pound at its Chicago stores, according to the company’s Web site.

Jewel-Osco also promoted choice rib eye steaks for $7.49 a pound and pork spareribs for $2.29 a pound.

Source: Bruce Blythe, Business Editor, Vance Publishing



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