Supermarket Perimeter - July 2022 - 35

UNCERTAINTY AHEAD
Pathogenic Avian Influenza sweeping through US commercial poultry, "
according to the report.
Overall, USDA expects minimal growth for chicken production, up
A market forecast
from rabobank
* Limited availability of many supplies,
ingredients and restaurant equipment
due to the global supply-chain crisis;
* Increasing food and energy prices,
including fertilizer, wheat, gasoline and
sunflower oil;
* Inflation that is outpacing consumers'
earnings is expected to see a shift away
from discretionary spending as paying for
utility bills, food and fuel take priority;
* Financial market volatility could stunt
the future growth and investment in
foodservice companies; and
* The looming threat of a global recession.
" As in other recessions, we would expect
consumers to reduce the frequency
of their visits to restaurants/bars, and
look to trade down more aggressively, "
according to Rabobank.
just .7% in 2022.
The bottom line? Slightly higher poultry production and slightly
higher red meat imports will leave the domestic meat and poultry
supply essentially unchanged in 2022.
Feed, labor, energy - all higher
Animal feed prices also continue to play a huge role in surging markets.
Feed prices have skyrocketed from where they were in 2020 as global
grain balance sheets tightened amid smaller global harvests in 2021 and
now by Russia's invasion of Ukraine.
The invasion shocked grain markets and sent grain and oilseed crop
prices up 20%-30% in a matter of days.
And while feed is the largest variable cost to livestock production, it's
not the only cost, as the CoBank report emphasizes. Labor and energy
also represent major expenses, and both of those have been rising
steadily as well.
The sharply higher costs for feed, and energy in particular, have yet
to fully impact wholesale and retail meat prices. Thus far, the consumer
has been assuming more of the burden of higher production costs as
they've shown up in prices on shelves and menus.
" The intense media coverage of food inflation in recent months
has prepared consumers, in a somewhat perverse manner, for higher
food prices, which is minimizing 'sticker shock' in 2022, " Earnest
said. " In previous times of real income reductions, consumers
have traded down to 'value' options such as chicken breast and
pork chops. "
Price volatility across the animal protein sector has become a daily
headache for procurement teams to manage, according to the report.
While prices started 2022 in post-holiday doldrums, wholesale values
were still elevated compared with pre-pandemic levels.
Volatility in wholesale markets remains an obstacle for promotional
" These unprecedented changes in spending patterns have proved
extraordinarily difficult for livestock producers, meat processors, and
consumer-facing channels, " Earnest said.
Combined with the ongoing severe drought conditions in the
Western US amid the backdrop of modest feeder calf prices, the nation's
beef cattle inventory remains in decline, according to CoBank. The
combined cow and replacement heifer inventory has dropped by a
whopping 12% since 2017, and the nation's sow herd is contracting and
is down nearly 6% over the past three years, primarily due to losses
sustained in 2018-19, prior to the pandemic.
USDA is forecasting a 2% decline in U.S. beef and pork production
in 2022. Given the broiler industry's ability to quickly ramp up
production, CoBank expected it to pick up the slack in terms of overall
meat production, but that has not turned out to be the case. Broiler
production expanded rapidly from 2013 to 2019, up some 2.4% annually
on average. In contrast, during the most recent two years, (2020-21)
annual broiler meat production growth averaged just 1.1%.
" Factors at play include uncertainties regarding the future of food
service, high feed costs, ongoing chick survivability, and Highly
planning. With combined cutout values of beef, pork, and chicken
climbing 22% YoY for the first quarter of 2022, consumers are all but
certain to see higher prices in the meat case.
Current dynamics playing out in whole turkey and ham segments
may signal what to expect for on-shelf prices for the rest of the year.
Turkey, and specifically whole turkey prices early in the year, can
indicate retailer price expectations for the year because they contract
and take delivery early in the year for the fourth quarter holiday period,
Earnest said.
To start 2022, wholesale turkey prices were up more than 20%
from a year earlier, and 30% above the three-year average. A major
factor tightening ham availability is reduced labor availability.
COVID exacerbated an already tight labor market hampering pork
processors' ability to de-bone hams, forcing larger bone-in ham
volume into export markets. While bone-in ham prices have fallen to
10-year lows, boneless ham values have risen to levels not seen since
2015, doubling the spread between the two cuts, to about $160/cwt.
With no end in sight to the industry's labor woes, we can expect the
premium for domestic boneless ham supply will remain elevated for
the rest of the year.
supermarketperimeter.com
JULY 2022 - 35
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Supermarket Perimeter - July 2022

Table of Contents for the Digital Edition of Supermarket Perimeter - July 2022

Supermarket Perimeter - July 2022 - Intro
Supermarket Perimeter - July 2022 - 1
Supermarket Perimeter - July 2022 - 2
Supermarket Perimeter - July 2022 - 3
Supermarket Perimeter - July 2022 - 4
Supermarket Perimeter - July 2022 - 5
Supermarket Perimeter - July 2022 - 6
Supermarket Perimeter - July 2022 - 7
Supermarket Perimeter - July 2022 - 8
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