Ample pork supply, deflating prices offer retail opportunities
It’s been a very positive year for the fresh pork category. We started the year with the Bloomberg headline, “It’s Pork Over Beef in America for First Time Since 1952,” (http://bloom.bg/1IFqmAS) which set the theme for the Year of Pork. After recovering from the PEDv epidemic from 2014, we’ve had an ample supply, and pork has been a great value.
While there was some deflation in the pork market in March and April because of increased production and supply, the market rebounded after April as retail promotion of pork increased, and with that, consumer demand. We saw a stabilization of retail prices as deflation stopped in April, and prices steadily increased through October. As pork supply was up and a great value, retailers increased their promotional frequency of pork, and there were some aggressive features that allowed us to sell more pork at higher prices.
According to FreshLook Marketing, for the four weeks ending Oct. 25, 2015, fresh pork sales increased 12.2 percent in volume sales, followed by a 7.2 percent increase in beef and 2.7 percent increase in chicken. Total meat volume sales increased by 5.1 percent, making pork the fastest-growing protein in the meat case.
We anticipated record production levels in the fourth quarter, causing pork prices to deflate once again. October started the anticipated price deflation with the average retail price dropping by 13 percent, to $2.85 per pound. Most of that deflation was attributed to increased promotional activity: retail pork ads were up 11.4 percent. This is a true incremental increase, as we recovered the promotional frequency lost due to PEDv last year.
Next, November brought record weeks for pork production. In the second week of the month, we hit a record high production of pork with 506.9 million pounds. That record stood for one week, when we hit a record 510.5 million pounds the following week. These two consecutive weeks of record pork production had a significant downward pressure on prices. Live hog prices fell below $40 per hundredweight in the last week of November — the lowest level since November 2009. Many factors contributed to this deflation in prices, many of which we expected all year.
Contrary to speculation that pork demand softened this fall, consumers are actually buying more pork than they ever have. A lot more hogs going to market means an ample amount of pork. And with the recent declines in exports due to the strong dollar and slowing world economy, pork prices will continue to deflate through the remainder of this year and likely into 2016. That translates into opportunities for aggressive promotional feature activity at retail.
The winter months are full of events and celebrations that involve food and entertaining. From football games to holiday gatherings, there are many opportunities to get pork products in front of consumers. This year, as many consumers have strapped holiday budgets, we encourage retailers to consistently feature pork items to keep them top of mind with consumers and in their shopping carts. Now is the time to offer consumers great value and options at the meat case. Following are a few ideas on merchandising pork over the next three months:
• Consider merchandising standing rib pork roasts, pork ribeye roasts and loin roasts as these cuts are a great value, easy to prepare and are elegant and flavorful choices for holiday meals. They are easy to slice and can be topped with a variety of sauces. Find roast recipes to share with your customers here: http://bit.ly/PorkRoastRecipes.
• This is a great time to merchandise hams. Hams are perfect center-of-the-table items because they take almost no effort to prepare, are great for presentation and can be used for leftovers. Consumers are interested in new flavors too, such as chipotle hams and molasses bacon-flavored hams. Good for holidays, good for rainy/snowy days, good for football days, good for any days. Find great ham recipes here: http://bit.ly/NPBHamRecipes.
• Nearly every appetizer can be made better with bacon, the meat worthy of a festival itself. Find bacon appetizer recipes here: http://bit.ly/BaconAppetizers.
Last year was an exceptional year for the pork industry. It was more profitable than expected for every part of the supply chain, from producers to packer/processors and retailers. The pork category gained shares in the meat case and consumer demand remained strong. As we start 2016, we encourage retailers to continue promoting pork products to consumers. Success in the retail channel is a crucial component in our overall success. NP