Foodservice outlook optimistic

Foodservice outlook optimistic

Recovered customer traffic and stronger sales in foodservice sector welcome news for meat and poultry demand.

Foodservice outlook optimistic
IMPROVED same-store sales and customer traffic fueled the National Restaurant Assn.'s Restaurant Performance Index (RPI) higher for a second consecutive month.

The RPI for April was the strongest since May 2013 and stood at 101.7, up 0.3%, making it the 14th month in a row above 100, which signifies expansion (Figure).

"In addition, restaurant operators have an optimistic outlook for business conditions in the months ahead, which is reflected by the expectations component of the RPI rising to its highest level in two years," said Hudson Riehle, senior vice president of the National Restaurant Assn.'s research and knowledge group.

Between April 2013 and April 2014, 51% of restaurant operations reported growth in same-store sales, while 26% reported a decline in sales.

Worth noting is that a net gain in customer traffic levels for the past two months is great news for animal protein demand, especially after low traffic during the long, harsh winter.

Overall, restaurant operators remain optimistic about sales gains in the months ahead, with 46% of operators expecting sales to increase in the next six months.

Still, the fact remains that the U.S. economy shrank at an annual rate of 1% during the first quarter, which is not a reassuring sign for domestic meat demand as current retail meat and poultry prices have been pushing higher.

Consumers' "willingness to pay" (WTP) for animal proteins fell last month, an indication that consumer pushback against higher meat prices may be beginning, according to the latest "Food Demand Survey" from Oklahoma State University.

The monthly survey asks consumers a series of questions about the WTP for several grocery items — including beef, chicken and pork — and their purchasing intentions for the upcoming month.

The survey released in May reported that the WTP for steaks was $6.35/lb., which is 68 cents lower than a year ago. In addition, consumers were willing to spend $4.63/lb. for chicken breast and $3.51/lb. for pork chops, both down 40 cents from May 2013.

In anticipation of higher meat prices, the survey participants said they would purchase more chicken and less pork and beef in the coming week. However, the intentions and actual amounts purchased often do not line up.

In spite of everything, consumers said they planned to spend more on both food prepared at home and food consumed away from home. Grocery food expenditures in May were $96.35, increasing 5% from April, and expenditures for food consumed away from home were $50.15, up 10% from the previous month.


Beef leads

Beef experienced significant volume growth in restaurants in the past year and continues to be a "mainstay" on menus, according to the 2013 "Usage & Volumetric Assessment of Beef in Foodservice" report, proprietary research from the beef checkoff program.

The annual survey of protein purchasing executives showed that beef remains the number-one protein in foodservice — in volume, in market share and in the dollars it brings to operations.

Since 2009, beef has represented the largest pound increase of any protein, totaling 178 million lb. Beef growth has outpaced foodservice industry growth over the past five years.

"This research supports what we already know to be true: No other protein can satisfy like beef. Operators understand the value that beef brings to their business, and they know beef is — and must continue to be — a mainstay on the menu due to strong consumer demand for beef," said Sid Viebrock, a beef producer from Washington and chairman of the beef checkoff's value subcommittee.

The pounds of beef sold in foodservice climbed by 79 million lb. in 2013 to a total volume of 8 billion lb. Beef now represents about 32% of the total protein market share in foodservice establishments.

Volume was up in every major beef category across the board, including steaks, roasts, ribs, ground beef and precooked roast beef.

The fastest-growing foodservice beef cut was the sirloin steak, with a total of 261 million lb. purchased last year, up 14 million lb. from 2012. Overall, steak purchase volume rose 18 million lb., increasing 1.7% from 2012.

The most dramatic growth across categories was for beef ribs, which gained 14% in volume, representing 18 million lb. Foodservice volume for roasts grew 2.3% over the year, with the chuck eye roast — a newer roast on foodservice menus — increasing 9 million lb.


Market roundup

Elsewhere in the livestock markets last week, feeder cattle futures continued to set new highs, hog prices were mixed and the chicken markets held steady.

In the cattle market, feeder cattle futures advanced all of last week, with the August contract settling at $199.825/cwt. at the close of markets last Thursday.

The fresh new consecutive daily highs resulted from lower grain costs and the historically small number of lightweight animals available for feedlots, Farm Progress analyst John Otte reported.

The new price level for feeder cattle has market observers worried that it could ease if live cattle prices decline or if grain prices pick up in the months ahead.

The U.S. Department of Agriculture reported limited trading in all feeding regions last week. Feedlots are optimistic that the small showlists will boost prices.

The May 17 federally inspected USDA slaughter report showed a large decline in cow slaughter, coming in 23% below 2013 and dropping for the sixth consecutive week, the Livestock Marketing Information Center reported.

This was most likely a result of improved pasture and range conditions in some parts of the U.S. and high milk prices, which discourage dairy producers from culling. Beef cow slaughter averaged 21% below the year-ago level, while dairy cow slaughter dropped 14% from 2013.

The drop in cow slaughter and overall tight beef supplies fueled cull cow prices higher, with beef values for wholesale cull cows averaging about 22% more than a year ago. Still, the normal seasonal price drop is anticipated to occur in the fall months.

Cash hog prices were slightly higher last week. The national average negotiated carcass price last Thursday for hogs delivered to the eastern Corn Belt was $106.22/cwt. and $111.29/cwt. in the western Corn Belt.

Pork cutout values gained last week, finishing at $118.21/cwt. last Thursday, up $2.21. Loins settled marginally higher at $120.84, while bellies finished lower at $150.33.

In the chicken markets, prices rose slightly, with the Georgia dock price for whole broilers holding at $1.1025/lb., compared to $1.0525/lb. last year. Breast meat prices were $2.20/lb. last Wednesday, while leg quarters were 55.5 cents/lb., and wings were $1.325/lb.

Turkey prices rose slightly to $1.03-1.10/lb. for both hens and toms.

Egg prices for all regions increased last week, with large eggs at $1.29-1.33/doz. delivered to the Northeast, $1.30-1.33/doz. to the Southeast and $1.26-1.29/doz. to the Midwest.

In the dairy markets, USDA reported the May all-milk price at $24.70/cwt., 60 cents lower than the April price but $6/cwt. greater than last year.

Cheese prices gained last week, with blocks at $2.05/lb. and barrels at $1.9675/lb. at the close of markets last Thursday. Butter prices settled at $2.1575/lb., down 3 cents.

Volume:86 Issue:23

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