Submitted by Gary Gorham, Stockyards Meat Packing Company

Beef supplies are tightening globally and the subsequent reduction in beef imports to the U.S. along with stronger demand for beef is expected to ratchet beef prices higher throughout the year. Beef prices could hit record highs this spring and summer, eclipsing the third quarter of 2008 when the average retail beef price hit a record $4.46 per pound. Retailers have reduced their margins to keep beef prices low so far this year. While retail prices were down 10 cents per pound in the first quarter, retail margins dropped by 20 cents per pound. This can’t continue. Retailers will have to raise retail prices soon. Given the weakly recovering economy, consumer demand may not appear so robust this summer with record high beef prices in grocery stores and restaurants.

There are a number of factors pushing beef prices higher including: the world economy continues to recover, feed prices are lower, red meat supplies are down, exports are strong, and retail beef prices have been low. The industry has been helped by an increase in imports since November while exports have been strong. Margins for packers meanwhile have improved due to higher live cattle prices, strong demand, and tight supplies should remain at near-record levels throughout the summer. Retail beef prices will remain strong throughout the year, but will peak this spring when supplies are the lowest. Two months before their typical seasonal upswing, wholesale ground beef prices are approaching record levels on steady demand and tight supplies. If sustained throughout the summer, the trend could pose challenges for burger chains that are vying for cash-conscious consumers with discount promotions. USDA data for the week ended April 10 showed wholesale prices for 90 percent lean and 50 percent boneless beef, the typical blend used to create 80 percent lean hamburger patties sold by burger chains, were roughly $1.63 per pound and $0.86 per pound, respective increases of more than 30 percent over price lows in November last year and nearing record highs of 2008.

Based on strong demand and tight supplies, ground beef prices should remain at near-record levels throughout the summer. The most vulnerable buyers, however, are burger-centric quick-service restaurants. While retailers have some flexibility in the meat case by way of product mix, QSRs will be pressured to raise prices, a tough proposition given that they’ve conditioned consumers to expect cut-rate deals in a sown economy. The problem on the foodservice side is when a discount war prices burgers at $1, it’s hard to get the consumer off that price. Discounts on ground beef at retail and in foodservice have helped boost demand at a time when supplies are typically tight. A typical squeeze in domestic supply that occurs in February and March would normally be offset by imports, particularly bull meat from New Zealand, Australia, and Uruguay. However, rains in Australia after three years of drought impelled farmers to hold onto their cattle, for example. Meantime, slaughter levels have not been high enough to offset the trend and the seasonal demand surge is on its way. It’s not a replay of 2008, but certainly well above a year ago. The bottom line is hamburger prices are going to stay higher.

The USDA’s Quarterly Hogs and Pigs report showed year-over-year lower producer farrowing intentions for the spring and summer pig crops and a slowing rate of increase in the winter pigs per liter. Farmers lately have overstated their furrowing intentions—probably in an effort to dissuade competitors from increasing production—which suggests that the actual March-May decline may be steeper than a reported 4 percent. The lower U.S. hog production implied by the report combined with expected lower U.S. live swine imports points to lower hog supplies for the balance of 2010 and 2011. Lower hog supplies at a time when a recovery of pork demand is expected to get under way, foreshadows continued higher hog prices. Domestic demand for pork will be supported by higher beef and chicken prices and international demand benefiting from greater market access to Chinese and Russian markets.

The outlook for the chicken industry just keeps getting better. Growing demand, restrained production, healthy prices, and well-behaved food costs are setting the stage for a substantial rebound in chicken profit margins. This is a rosy picture of chicken industry fundamentals heading into the summer grilling season. The forecast for U.S. broiler meat production in 2010 was increased by 375 millions pounds to 36.3 billion pounds, 2 percent higher than in 2009. With a larger decline in broiler production expected in the first quarter 2009, the estimates for broiler ending stocks was also reduced. Even with expected higher production lower imports, wholesale prices for many broiler products have continued to remain above the previous year. The longer that the chicken industry stays disciplined with production the more sustainable cutout margins can be. Chicken profit margins should get a further boost from expected declines in corn and soybean meal prices due to projections for a record 2010-2011 corn crop, record South American soybean production, and record U.S. soybean acreage. Unseasonably strong pricing through Easter was driven by improving demand in both retail and foodservice. Food companies, restaurant operators, as well as other poultry industry contacts all suggest that foodservice has in fact begun to improve, albeit modestly.

Submitted by Phillip Young, US Food Service

The Gulf of Mexico BP Deep Horizon oil well explosion, sinking, and subsequent oil leak have dominated national news for the last month. The oil rig explosion occurred on April 20, and fishery closures began on May 2. Initial closures included approximately 3.5 percent of the Gulf of Mexico and by mid May, the closed areas totaled roughly 7 percent of the gulf. On May 18, the closed areas were more than doubled in size, and expanded south and east towards peninsular Florida following discovery of oil in the gulf loop current that flows clockwise from the Gulf Coast toward the Florida Keys and mainland Florida.

The greatest impacts to the seafood supply have been to domestic shrimp and oysters harvested from the gulf, and the additional closures south and east will affect sword and tuna long liners. Pud shrimp supply had been limited as the industry awaited the opening of the gulf brown shrimp season in May, and the oil spill has severely reduced available shrimp harvest areas. These closed areas included the coastal waters of western Florida, all of Alabama, all of Mississippi, and a portion of Louisiana. The waters off Texas were closed on May 15, as they are every year, to allow the brown shrimp to grow to 90mm-plus and begin their emigration to deeper water from bays and estuaries. This closure normally lasts from 45 to 90 days, and reopens when the Texas Wildlife and Parks Division determines the mean size of maturing brown shrimp to reach a mean size of 112mm. The Texas waters traditionally reopen on or about July 15. Expect all domestic shrimp products to be in extremely short supply in the short term. Product from Central America, South America, and Asia will be offered as substitutes. None of those markets specialize in very small shrimp, so look for 90-110 or 110-130 as smallest options. The vannamei white that is farmed in Asia and Central and South America is rarely raised to 21-25 and 16-20 and large sizes either. Look for both the very small and very large shrimp to be the toughest find while gulf shrimp supplies are constrained.

Oyster supply may be an even larger problem than shrimp availability. There are alternative sources for shrimp at or near gulf shrimp prices for like sizes, but there really is not a best alternative for gulf oysters. East and West Coast oysters are substantially more expensive than their gulf cousins, and the percentage of gulf oysters in the market approaches 70 percent. The only bright spot is that production of gulf oyster shell stock had just shifted to the West into western Louisiana and Texas when the accident occurred. Prices for available product have risen approximately 25 percent. Frozen half-shell oysters, IQF Sea of Japan shucked oysters, and frozen pillow packs of shucked oyster meats are alternatives. We have seen limited shell stock from eastern Florida (not much product here) and Texas. Shucked meat availability is even more limited.

The oil spill’s impact on finfish fisheries in the gulf may be less significant. Long line fishermen have greater range than shrimpers and catches occur throughout the gulf. The southern gulf and western gulf have not been severely impacted by closures as of yet, though shallow water grouper catches will be curtailed. This is another resource with more alternative sources than gulf shrimp. The greatest impact on the seafood industry from this event may be the damage done to the customer’s perception of seafood from the Gulf of Mexico. Gulf states have worked diligently and spent many marketing dollars to promote gulf seafood as a superior product to import alternatives. State and federal agencies are conducting extensive testing of seafood being landed at docks to ensure there is no trace of hydrocarbons in oysters, fish, and shrimp catches, and the coast guard and fish and game law enforcement are patrolling to make sure no recreational or commercial fishing is taking place in restricted areas.

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Submitted by Stacey Evans, Linen Guru

Summer Hemstitch

When I think of summer, garden parties, weddings, and afternoon teas always come to mind. I picture clear-span tents adorned with flowing drapery, soft lighting, and centerpieces consisting of brilliant colors of sunset. I also imagine tables and natural or crisp white chairs set in lush green grass surrounded by fresh floral. Hemstitch is my favorite go-to summer linen for its versatility and simple, yet, sophisticated appearance suitable for any Southern social occasion.

Hemstitch linens and napkins create a crisp, light, and airy feel even when paired with a lamour or poly dupioni underlay. The linen is delicate in its appearance of simple cotton fibers and sewn Swiss dots, enabling a table to look casual or sophisticated. A hemstitch napkin can be used with flocked linen for an eclectic yet casual charm. In comparison, a hemstitch overlay placed on top of a basic lamour, taffeta, or silk linen adds a new richness to those heavier textures, providing depth and elegance to the table. It is the juxtaposition of contrasting light and heavy fabrics that makes hemstitch versatile to any social occasion.

This classic linen provides a Southern charm and elegance that is perfect for bridal party lunches, afternoon teas, or late afternoon receptions. It is the perfect blend of Southern hospitality and refinement.

Stacey Evans is the Carolinas and Tennessee sales representative for Cloth Connection. You can reach her at 704-776-0381 or sevans@clothconnection.com.