Pork Production Forecast for '06 Bodes Well for Retailers

DES MOINES, Iowa -- Good news lies ahead for food retailers in 2006 with regard to availability and opportunities to promote fresh pork, so says the National Pork Board here.

U.S. pork production is expected to grow in 2006 with a 1 percent to 3 percent increase in hog slaughter, while hog weights will continue to climb by 0.5 percent to 1 percent.

"We anticipate hog demand to continue to be robust and for pork demand to possibly grow in 2006," said economist Steve Meyer, of Paragon Economics. "As beef prices move higher, it appears pork remains a great alternative for retailers. The key for U.S. pork prices in 2006 will be exports." Meyer said exports are up more than 50 percent from two years ago and have been a major factor for the price strength in 2005, which marks the industry's 13th straight record export year.

Other proteins are also expected to experience growth. U.S. beef production is projected to increase modestly in 2006 as Canadian feeder and slaughter cattle return to the U.S. market. The expected resumption of exports to Japan will be positive for beef prices, which are expected to fall only slightly in 2006. U.S. chicken output is poised to grow rapidly provided the bird flu and consumers' concerns regarding the issue are kept in check.

Speculation about other consumer issues affecting pork demand includes the comeback of the low-carb diet and the possible decline of gasoline prices. "If consumers jump back on the low-carb diet bandwagon, pork could benefit greatly. Also if gas prices fell, consumers may have more disposable income to put toward eating out or traveling, which might positively affect pork demand," said Meyer. "There are a number of consumer 'taste and preference' issues that could positively affect pork demand; however, it is very difficult to predict those."

Though pork sales are traditionally strongest during the warmer months of April through September, retailers have opportunities to help drive fresh pork sales during the first quarter.

According to FreshLook Syndicated data, pork chop sales are 2 percent higher during the first quarter than the average quarter across the year. Also higher in the first quarter are ground pork sales (up 7 percent), smoked pork sales (2 percent) and pork offal sales (2 percent). Pork roast and tenderloin also hold great potential for retailers.

"Pork roasts and tenderloin sales are typically strongest during the fourth quarter -- the holiday season," noted Karen Boillot, director of retail marketing for the Pork Board. "However, FreshLook shows us that first quarter is also a moderately strong quarter for these segments so there is the opportunity to springboard to higher sales."

Roast sales are 11 percent higher and tenderloin sales are 2 percent higher during first quarter than the average sales across both the second and third quarters. In addition, counter seasonal opportunities exist for pork ribs whose sales, while lower than the warmer months, pick up in the first quarter. Pork rib sales are 13 percent higher during the first quarter than they are during the fourth.

Retailers may also want to increase fresh pork feature support in the first quarter to help boost pork sales. According to Leemis Promo Data, fresh pork's share of features during the first quarter of 2005 were 16 percent -- tied with the fourth quarter of 2004 yet lower than the third quarter of 2004 (17 percent) and the second quarter (18 percent).

"By featuring pork during the first quarter," says Boillot, "retailers can remind consumers of the fresh pork option and keep pork top of mind during consumers' weekly shopping trip."
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