Chicken Market Update- Week of 4/16

Market Update

· Easter is over and retailers are featuring poultry for the next few weeks. Demand has picked up for some for white meat items, bone in dark meat is the biggest feature this week.

· Drums and B/I thighs have moved up on the market, and hindquarters are also in high demand.

· Thigh meat was higher yesterday, and is expected to move higher.

· Tenders are also hot.

· Wings have finally moved lower on the market, finally we are seeing some small relief.

· Overall the tone is still bullish, breast meat should make a move within 2 weeks, as BBQ season kicks in full throttle.

Poultry Market Update for the week of 12/5

· The poultry market is still making headway with its supply issues. Cut backs have kept supplies in check and demand for first of the month is starting to emerge.

· Wings and tenders are still the hottest items. Wings are nonexistent and formal market goes up every day. Tenders are still tight.

· Breast meat has a better tone and all dark meat is steady with thigh meat in the best shape.

· Reports are calling 2012 a year of higher poultry cost. This could be possible if the industry keeps supplies in checks with reduced production for as much as 4-5% tonnage compared with 2011. This industry usually lacks any kind of discipline.

Poultry Market Update for the week of 10/31

Market Update

· Weak…most chicken meat and parts are weak, except not wings and tenders. Demand is very, very sluggish.

· Breast meat and thigh meat are both showing signs of weakness.

· Some of the bone in items associated with the bnls parts are at least steady, but jumbo boneless white and dark meat are not in good shape.

· Wings are the star, but they are even starting to see resistance.

· Cut backs are still desperately needed, but with weak demand, not sure how much they will help in the near term.

· Another chicken producers bites the dust; a smaller company called Cagle’s filed chapter 11 last Thursday. They will try to cut debt and stay in business, but the outlook for poultry is still dim for the next 6-9 months. This industry is in turmoil.

Poultry Market Update for the week of 10/24

Market update

· It will be the week of the two’s next week, and business seems to correspond with that time of the month.

· Breast meat is a little sluggish this week in anticipation of slower business sales next week. Trade levels are a little lower on breast meat.

· This market could be stuck in a rut for a month or two before we see clear direction and hopefully a pickup in demand, because the supply chain seems in better shape.

· Thigh meat now seems to be on the downward trend. More inventory is showing up in freezers as fresh sales slow. This could happen for a few more weeks, and then fresh sales should pick up again in late November and December as foot traffic in malls increases for the shopping season.

· The formal thigh meat market is off a little this week, but over next 2-3 weeks should come off another 12-17 cents.

· Tenders and wings are in decent shape, and most bone in dark meat is also holding steady.

· Producers will probably have to make additional cut backs into the winter to insure some kind of profitability next year, but let’s see if they are smart enough!

China To buy More Corn

In a decision that is being heralded as "a new era", Shanghai JC Intelligence Co's chairman Hanver Li announced that China intends to import as much as 15 million tons of corn by 2015. The nation, who has not imported a significant amount since 1996, sites cultural changes such as higher incomes and a larger demand for milk, meat, and eggs, as the reason for this policy change.

BlogginsStocks.com expands on the possibilities this announcement opens for the US and for the world grain market:

The logical place for China to turn to for its corn purchasing would be the U.S. We have an oversupply this year. Exports to China will help stabilize prices, not only for this year, but for the next five years.

Currently, about 20% of the U.S. corn crop goes into the production of ethanol. If we combine China's buying and the growing need to use corn for ethanol, we can look for higher prices. So far, corn has rallied 8.4% since April 27 when the United States Department of Agriculture (USDA) announced China's first purchases.

Further Reading:
Sf Gate: Corn May Gain on Speculation China's Import Demand Will Surge
Bloomberg on The New Era

Restaurants Still Closing

Nation's Restaurant News is reporting a 1% decline (or 5,204 restaurants) have closed since spring of 2009. The biggest hit? Independents- who make up about 54% of the market- saw the largest drop. Chains lost only 164 locations, despite closings from brands such as ESPN Zone, Fuddruckers, and Uno Chicago Grill.

NPD’s CREST research service reported that visits to restaurants in the United States declined by 3 percent for the 12 months ended in May 2010. Consumer spending at restaurants fell 1 percent in that same period, the first decline in dollars the firm has reported since it began tracking foodservice industry sales in 1976, NPD said.

Independent restaurants have suffered sales and traffic declines as prolonged high unemployment has weakened consumer spending in many areas of the country, creating less revenue from which operators can fund crucial investments in marketing or equipment.

Who is still open and thriving? Burger joints and wing places are still hot. Five Guys Burgers and Fried are expanding and Wingstop reported its 28th quarter of increased same-store sales! It would appear that familiar, comfort-type foods are still in.

Further Reading:

Bloomberg on the closures.

Meat Prices to Rise as Global Meat Supplies Shrink

The Cattle Network is reporting that 29 year lows in the global meat supply could cause prices to go through the roof:

Worldwide beef, chicken and pork production is expected to rise 1.4 percent this year, to a record 233.3 million metric tons, Basse estimated. But total meat stocks are projected to fall to 1.8 million metric tons at the end of 2010, the lowest since 1981, Basse said.

Meat consumption should remain strong as China’s economy expands, and the U.S. may see additional export demand from Japan following an outbreak of foot-and-mouth disease in the country earlier this year, said Basse, who’s president of Chicago-based AgResource Co.

“We’re optimistic long-term” on cattle and hog prices, Basse said during a June 28 crop and weather seminar hosted by CME Group, the Chicago futures exchange operator. “We think there’s a lot more bullish opportunities in meats than in grains.”

Basse expects prices for slaughter-ready cattle to climb above $1 a pound over the next 12 months and possibly reach records above $1.10 if harsh winter weather in the central U.S. impedes animals’ ability to gain weight.

Russia Lifts Ban on US Poultry!

On Thursday, the meeting between President Obama and Russian President Medvedev resulted in the two agreeing to lift the trade ban on importing US poultry. The ban had been in place since January.

"To deepen Russia's integration into the global economy, I reaffirmed our strong commitment to Russia's ascension to the World Trade Organization," Obama said. "Today, we've reached an agreement that will allow the United States to begin exporting our poultry products to Russia once again."

Restaurant Hiring Up Almost 5%

Via RestaurantNewsRelease.com:

Restaurants are expected to add 428,000 jobs this summer season, a 4.6 percent increase over the March 2010 employment level, according to National Restaurant Association projections released today. America’s restaurants are the nation’s second-largest private-sector employer and job-creator—with nearly 13 million employees—a number projected to grow by more than one million positions in the next decade.

“In these tough economic times, restaurants are playing an ever more important role in their communities, creating jobs and economic opportunity for our nation,” said National Restaurant Association President & CEO Dawn Sweeney. “Every dollar spent in restaurants generates an additional $2.05 spent in the overall economy,” she added.

Here are the top 10 2010 Restaurant Facts from Restaurant.org:

Top Ten Facts in 2010

• $1.6 billion: Restaurant-industry sales on a typical day in 2010.

• $2,698: Average household expenditure for food away from home in 2008.

• 40 percent of adults agree that purchasing meals from restaurants and take-out and delivery places makes them more productive in their day-to-day life.

• 73 percent of adults say they try to eat healthier now at restaurants than they did two years ago.

• 57 percent of adults say they are likely to make a restaurant choice based on how much a restaurant supports charitable activities and the local community.

• 78 percent of adults say they would like to receive restaurant gift cards or certificates on gift occasions.

• 52 percent of adults say they would be more likely to patronize a restaurant if it offered a customer loyalty and reward program.

• 57 percent of adults say they are likely to make a restaurant choice based on how much a restaurant supports charitable activities and the local community.

• 56 percent of adults say they are more likely to visit a restaurant that offers food grown or raised in an organic or environmentally friendly way.

• 78 percent of adults agree that going out to a restaurant with family or friends gives them an opportunity to socialize and is a better way to make use of their leisure time than cooking and cleaning up.

Two sides of the recession: dollar stores & lobster mac & cheese

Reuters has two opposing stories on consumer spending habits during the current economic climate. The first report coming from the National Association for Specialty Food Trade Show in New York this week, where vendors are quick to point out that people aren't eating in restaurants, but they are indulging in good foods to cook at home:

"People may not be buying flat-screen TVs, but they will buy lobster mac and cheese," said Cal Hancock, whose Maine-based Hancock Gourmet Lobster Co. sells the frozen delicacy. "It's the ultimate comfort food."

The National Association for the Specialty Food Trade, which sponsors the trade show, said the industry had $60 billion in U.S. sales in 2008. Fifty-eight percent of its manufacturers reported a drop in sales last year, due to economic pressures.

You can read the rest of the article here.

The second story has consumers pinching pennies all the way to forsaking the grocery store for the Dollar Tree:

The retailers are trying to steal "fill-in" shopping trips from grocers, hoping consumers will pop into their stores mid week when they run out of milk or eggs or pasta.

"Dollar stores... are an increasingly daunting threat to especially regional and neighborhood-type independent grocers," said Gary Giblen, an analyst at Goldsmith & Harris.

With many consumers losing jobs or seeing their hours cut to part time, shoppers have more time and greater incentive to compare prices and scour a variety of stores for deals.

The rest of the story is available here.

How are the chains doing now?

We have begun to see little glimmers of hope on the economy from the news outlets, but is any of that translating into sales? Are chains still recession proof- and if so, does it make a difference if it is sit down or drive through?

We've talked before about how Mc Donald's was doing well in the economic climate, but this week Forbes reported on some sit down restaurants actually posting profits.

P.F. Chang's China Bistro Inc. said before the market opened that its profit rose 33 percent in its first quarter, far higher than analysts expected. The company, which operates the P.F. Chang's China Bistro chain and the smaller Pei Wei chain, also increased its guidance for the year.

Meanwhile, Brinker International Inc., which operates the Chili's Grill & Bar chain, also reported a profit in its fiscal third quarter, matching analyst expectations by controlling costs.

But it isn't all good news; Yum! Brands, who includes Pizza Hut and Taco Bell in its family of companies, saw a decline in first quarter profit. CNN Money has more:

Yum Brands Inc. (YUM) vows to "slug it out" with competitors in 2009 after reporting a 14% dip in first-quarter profit amid a decline in U.S. sales from increasing pricing competition and slumping dinner sales for its KFC and Pizza Hut brands.

Fast-food chains have been more resilient in the economic slowdown than casual-dining restaurants due to their lower-priced food and convenience. But the higher-priced chains are cutting prices to win back customers, leading some to believe that the quick-service industry may resort to a "zero sum industry" highlighted by intense competition for fixed pool of customers.

Thinking about opening a restaurant? This article from the Portland Small Business Examiner has some great advice in this article.

Corn: Back in the News

After we spent last summer concerned with a corn shortage, and every major weather event had people in a panic that we would run out of food, the crop has taken taken a dip on the commodity roller coaster. Due to falling demand, farmers are planning on planting less corn and more soybeans this season. Bloomberg has more:

Farmers are planting more soybeans because they cost about 32 percent less to raise than corn, according to a University of Illinois study. Informa Economics, a private forecaster in Memphis, Tennessee, told clients on March 13 that soybean acres may exceed corn for the first time ever.

Analysts in the Bloomberg survey on average expected farmers to plant soybeans on 79.11 million acres, up from 75.72 million last year. The increase is equal to the state of Connecticut, plus 279 square miles.

To make room, growers probably will use less land for corn, the most-valuable U.S. crop. Planting will drop to 84.7 million acres from almost 86 million last year, the Bloomberg survey shows. Corn stockpiles at the beginning of March probably totaled 7.012 billion bushels, up 2.2 percent from a year earlier and the highest for that date since 1988, analysts in the survey said.

Naturally any talk of less corn prompted futures to rise. From the WVGazatte.com:

May corn added 8.5 cents to $4.045 a bushel and May soybeans leaped 29 cents to $9.81.

Those prices are still much lower than they were last year, and farmers are feeling the hit in the sagging prices. Also from Bloomberg:

Patrick Solon, 45, who farms corn and beans on 1,200 acres near Streator, in northern Illinois, said his costs for seed, fertilizer and machinery will jump at least 25 percent this year. He plans to plant 720 acres of corn, down 14 percent from about 840 last year.

“My income is going to fall this year and I’m putting aside some of last year’s profit for next year,” Solon said by telephone.

But some argue that the decline is more of a balancing out of the industry:

“Farm income has to come down,” said Michael Swanson, a senior agricultural economist at Wells Fargo & Co. in Minneapolis. “We don’t need any more wheat, soybeans or cotton, and corn supplies should be adequate with the drop in demand.”

The consensus seems to be that barring any major weather catastrophes, we have enough corn. We will have to wait and see if this translates into lower food prices.

Further Reading:

Des Moines Register on the impact of corn prices in Iowa.

The Capital Times on less corn being planted.

Recordnet.com on an ethanol company running out of cash.